National Insurance hike: Arts charities pressure Reeves for sector exemption

More than 100 arts and cultural organisations have joined thousands of charities in signing an open letter to Chancellor Rachel Reeves calling for her to make them exempt from higher National Insurance Contributions (NICs).

Issued by National Council for Voluntary Organisations (NCVO) and Association of Chief Executives of Voluntary Organisations (ACEVO), the letter warns that the decision by the government to increase employer NICs in last week’s budget will place “another major strain” on a sector that is already struggling.

Under the new system, starting April 2025, employers will pay NI at 15% on salaries above £5,000, whereas currently, the rate is 13.8% on salaries above £9,100.

The changes are expected to raise £20bn annually, helping to fund the government’s plan to increase spending by almost £70bn a year over the next five years.

Peter Smalley, chief executive of Northamptonshire Music and Performing Arts Trust, which was one of the signatories to the letter, said the changes will cost the charity an additional £100,000 each year.

He said that the organisation, which runs enrichment programmes for schools and individuals of all ages and is the leader of the Music Education Hub for Northamptonshire and Rutland, will have “no option” other than to raise fees or reduce fee remissions for those unable to fund themselves.

Debbie Coates, chief executive of The Mozartists orchestra, said she signed the letter because, while she understands the need to increase public income, the cost to charities, which do work to benefit society, will be hard to bear.

She said, “We face a constant battle to raise the funds needed to continue our work, which includes engaging with thousands of children each year in schools where musical provision is lacking. This increase will be an extra financial burden when we are already struggling to fund the personnel that we need and pay liveable incomes.”

Increased vulnerability of workers

In the budget, Reeves also increased employer allowance from £5,000 to £10,500, exempting 865,000 smaller employers from paying any NIC at all next year.

For touring theatre company Red Ladder – an Arts Council England National Portfolio Organisation with a turnover of around £300,000 each year and 2.6 full-time equivalent employees – the increase in the threshold for the NI Employment Allowance means overall it will experience a net positive effect from the changes.

Executive producer Chris Lloyd, who also signed the letter, said he had hoped that charities could have been exempt from the increased employers’ NICs or given a choice between accepting the increased threshold of £10,500 or paying the increased 15% contribution.

He expressed concern that organisations might feel pressured to reduce the number of PAYE staff and increase freelance relationships to lessen the NI burden.

Lloyd said, “This, then, would, undoubtedly, increase the vulnerability of workers across the industry as rights, etc, reduce dramatically, which surely should never be the aim of a Labour administration, should it?”

‘Double whammy’

In Norfolk, community venue Sheringham Little Theatre has launched a playwriting competition for local writers to help manage the financial “black hole” it faces after last week’s budget.

The charity plans to sell tickets to performances of the winning entries, followed by an on-stage critique by the actor Suranne Jones, the theatre’s president.

Theatre director Debbie Thompson told the BBC the venue was reeling after the “double-whammy” of changes to employer NICs and the rise in the National Minimum Wage from £11.44 to £12.21 per hour, costing the theatre an additional £25,000 a year.

“This comes after Covid, then we had the cost-of-living crisis – which is still going on,” she said.

‘A dire situation’

In their letter, NCVO and ACEVO warn that charities were already in “a dire situation” ahead of the budget, meeting demands of rising need in communities while their own costs have escalated and funding has declined.

“Our sector will have less flexibility than ever before to absorb these increasing costs,” the letter states.

“Many of us will have to make difficult choices in the coming months as a result.

“The harsh reality is that many organisations may be forced to reduce staff, cut salaries, and most importantly, scale back services for the very people they strive to support.”

The support bodies have called on Reeves to make an exemption to higher employer NICs for voluntary organisations, as it has done for public sector bodies such as the NHS and local councils.

“You have recognised the challenging impact of raising employer NICs in your decision to reimburse the cost to public sector organisations,” the letter states.

“As essential partners of the state – both through direct public service delivery and through providing preventative services where austerity has left a void – the voluntary sector requires the same support.

“We urge you to commit to reimbursing voluntary organisations’ increased employer NICs, the same as you will do for the public sector.”