£3.2million national insurance black hole in VCFSE finances estimated in Sefton

Following the autumn budget announcements at the end of October, understandably there has been much discourse on the planned increases in Employers National Insurance Contributions (ENIC). Alongside increases in the National and Real Living Wage, many voluntary, community, faith and social enterprise (VCFSE) organisations are quite rightly worried about what this means for their future financial planning and resilience.

Whilst public sector organisations are shielded from these rising costs, the VCFSE sector has not been afforded the same treatment despite receiving over £16bn to deliver public services nationally per year (NCVO, 2023)[1].

Whilst national VCFSE bodies have been developing financial figures to demonstrate the potential impact of ENIC increases on the sector, the VS6 Partnership have been working with Voluntary Sector North West (VSNW) to develop our own figures for Liverpool City Region (LCR). The results are worrying.

Using data gathered from the Cheshire and Merseyside State of the Sector report (2023), we have calculated that the VCFSE sector in Liverpool City Region is facing a £17.7million shortfall in finances in 2025/26 when ENIC rises comes into effect.

For Sefton, we are facing a £3.2m black hole in VCFSE finances.

This figure is inclusive of the increase in Employers Allowance but does not include rises in living wages. Therefore, this figure is the minimum impact that the sector can expect to be hit with in LCR.

Sefton CVS and the VS6 Partnership are extremely concerned by this.

In explaining the increase, the Chancellor provided ‘businesses’ with a choice: Absorb costs through efficiency and productivity, lower profits and/or lower wage growth. These options are not viable for the VCFSE sector.

We already work at maximum efficiency, doing what we can in the face of reduced funding and heightened demand. We are not-for-profit; therefore, we do not have profits to lower. The rise in living wages, whilst welcomed by many organisations who believe in paying their staff well, is creating a squeeze along pay scales and impacting organisational resilience. All this alongside evidence that shows the VCFSE sector is already subsidising public sector contracts by as much as 20%[2], with 62% of charities reporting having to do so already[3].

Whilst we welcome the Government’s plan to restore charities to “the centre of national life” as part of the new civil society Covenant, and the Prime Minister’s positive statements of “harnessing the dynamism, innovation and trusted reach of civil society” to “boost growth and deliver better outcomes for communities”, we cannot continue to fulfil this role if the sector’s resilience and sustainability is at such risk.

So, what do we do next?

We support NCVO’s open letter to the Chancellor on the impact of ENIC for charities, calling for the exemption of the VCFSE sector from planned increases.

Alongside this plea, more locally the VS6 Partnership are co-ordinating a response across LCR to ensure that the impact on the VCFSE sector is understood and acted upon.

At an LCR level we will be writing to Metro Mayor Steve Rotheram and the Chief Executive of the Combined Authority, and within our boroughs we will be targeting our MPs and commissioners, with a call to action to support us in our sector advocacy in calling for:

  1. A delay in the implementation of this policy until 2026 for all VCFSE organisations.
  2. All current Public Sector contracts and grants to the sector to be automatically subject to an increase equal to the current shortfall in ENIC and where possible NLW increase.
  3. Going forward, commissioners and procurement teams to budget for an annual uplift in contracts as standard.

We will also be working with our colleagues at Cheshire and Warrington Infrastructure Partnership to co-ordinate a regional Cheshire and Merseyside approach.

[1] https://www.ncvo.org.uk/news-and-insights/news-index/uk-civil-society-almanac-2023/financials/what-are-the-trends-in-income-from-government/

[2] https://www.ncvo.org.uk/news-and-insights/news-index/the-true-cost-of-delivering-public-services/survey-findings/

[3] https://npproduction.wpenginepowered.com/wp-content/uploads/2024/02/NPC-State-of-the-Sector-2024-Ready-for-a-reset.pdf