Charities and childcare nurseries across the UK are expressing outrage over a planned increase in National Insurance Contributions (NICs), which could force some organizations to shut down. The rise in NICs, effective from April 6, is part of the government’s strategy to boost funding for public services. However, many of these organizations, unlike private businesses, claim they have no means to offset the added costs.
Katryn Bennett, the owner of Acorn Day Nursery in Somerton, Somerset, voiced her frustration, stating that the new tax burden could drive her to close the nursery. “It’s totally unfair,” Bennett said. “If this treatment continues, people like myself will quit.”
The government, however, has defended the increase, asserting that these changes are necessary to stabilize public finances.
Childcare Providers Struggling with NICs
At Acorn Day Nursery, where I visited recently, staff were busy caring for young children, including during a playful hairdressing session led by Mrs. Bennett. She started the nursery 26 years ago but is now concerned about its future due to the anticipated NIC rise, which will cost her business an additional £35,000 annually.
Unlike for-profit businesses, nurseries like Acorn face strict regulations on staff-to-child ratios, which means they cannot reduce staff numbers to offset the financial burden. Additionally, Bennett pointed out that her nursery cannot raise fees, as most families rely on government-funded childcare vouchers.
“We’re dictated to. We’re left with no option,” she said, referring to the government’s decision to increase NICs without adjusting voucher payments to match the new costs. While the government has raised NICs for all employers, it has not adjusted voucher values, creating a financial strain for businesses like hers.
Charities Feel the Pinch
The situation is even more dire for charities, who also face a significant NIC increase. Keith Sinclair, the CEO of Brainwave, a charity in Bridgwater that supports children with disabilities, is facing an additional £72,000 in annual costs due to the NIC hike. Like many charities, Brainwave does not charge for its services, meaning it cannot pass on the additional costs to those it serves. Sinclair, who already raises £2 million annually through donations, now needs to find more funding to cover the increased NIC bill.
“I feel angry about it, because we all know that health and social care is on its knees, and we are increasingly picking up the slack,” Sinclair said. “Then, we are faced with increasing costs to do that.”
The charity’s work is becoming more crucial as families with disabled children find it harder to access services within the NHS. Yet the government’s decision to increase NICs threatens the sustainability of these vital services.
Government’s Response
When asked about the impact on charities and nurseries, a spokesperson for HM Treasury explained that the government is providing support to public sector employers for the additional NICs. However, private companies and charities contracted by the government will not receive specific support. This means that while NHS hospitals will get assistance, hospices and other charities like Brainwave will not.
The government also pointed to the £6 billion in relief provided to charities last year, including exemptions from business rates. However, critics argue that this relief is not sufficient to offset the additional costs resulting from the NIC hike.
As these organizations brace for the increase, many are left wondering how much longer they can continue operating under these financial pressures. The future of vital services for both children and vulnerable adults may be at risk if these additional costs are not addressed.
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