UK Government must cover cost of national insurance hike for charities – Swinney

The UK Government must reimburse charities for the cost of increasing employers’ national insurance, John Swinney has said.

The First Minister said the tax hike should not apply to the third sector.

Rachel Reeves raised the rate of national insurance for employers during her Budget from 13.8% to 15%, and lowered the salary threshold from £9,100 to £5,000.

The Chancellor announced about £40 billion in tax rises in total, £20 billion of which will come from the national insurance increase.

She said the measures are needed to fix the nation’s finances.

But Scotland’s First Minister warned the UK Budget “cannot be balanced on the back of Scotland’s charities”.

Speaking at the Social Enterprise Scotland conference in Edinburgh, Mr Swinney said: “The UK Government’s decision to increase employer national insurance contributions is having a set of unintended consequences which is causing real alarm across the country.

“The costs to the public sector in Scotland could amount to £500 million – but other vital sectors are facing a huge financial hit which could have devastating consequences for front line services.”

Mr Swinney said GPs, the social care sector and universities will be forced to pay millions more each year due to the tax rise.

He said it is estimated charities in Scotland will face a £75 million “price tag” due to the Budget.

The First Minister added: “It is completely unacceptable for our third sector to be punished as a result of decisions made by the Chancellor. The UK Budget must not be balanced on the backs of Scotland’s charities.

“The Chancellor clearly did not foresee the extent of the problems her decisions would cause when she published her Budget – the panic and confusion that has emanated from the Treasury since makes that clear.

“But there is still time for the UK Government to do the right thing and meet these costs in full.

“The Chancellor can address the potentially devastating impacts for frontline services – and the UK Government must now fix the situation they have created.”

His calls come after his Finance Secretary urged the Treasury to fully compensate Scotland’s public sector for the rise in national insurance.

Shona Robison said the measure could cost the Scottish Government – which has a proportionally larger public sector workforce than the UK as a whole – £500 million.

The UK Government has said extra funds will be made available to help cover the costs, although the details will need to be agreed upon during talks with the Scottish Government.

Labour has said the Budget will already deliver an extra £1.5 billion to Holyrood this year, and another £3.4 billion next year.

The UK Government has been approached for comment.