Scottish First Minister Swinney Calls on UK Government to Fund National Insurance Increases for Key Sectors

John Swinney, Scotland’s First Minister, has called upon the UK government to bear the cost of National Insurance contribution rises for Scottish charities, general practitioners (GPs), social care providers, and universities. He stated that the tax hike, which was unveiled in the autumn Budget, has generated “alarm across the country”. This appeal comes on top of the Scottish government’s estimated £500 million required to mitigate additional staff expenses for public sector employers. The Treasury has committed to supplying further funding to assist devolved administrations in managing these public sector expenditures, asserting that its tax framework for charities ranks “among the most generous of anywhere in the world”. Despite third sector organizations frequently being contracted by local authorities to deliver public services, they are not presently anticipated to receive reimbursement for the elevated National Insurance contributions under Labour’s proposals. Medical professionals, care organizations, and higher education establishments have cautioned that the escalating costs might result in closures. Addressing the Social Enterprise Scotland conference in Edinburgh, Swinney cautioned that the tax increase could have “devastating consequences for front line services”. He stated, “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.” Currently, employers contribute at a rate of 13.8% on employee earnings exceeding an annual threshold of £9,100. During the Budget announcement, Chancellor Rachel Reeves indicated that this rate would rise to 15% in April 2025, while the threshold would be lowered to £5,000. To support the smallest businesses, the employment allowance, which enables companies to decrease their National Insurance liability, is set to increase from £5,000 to £10,500. Nevertheless, several organizations across Scotland have cautioned that these adjustments could subject their members to considerable strain. Representatives for doctors indicated that additional staff expenses amounting to thousands of pounds might force the closure of some practices. The Scottish Council for Voluntary Organisations projected that the National Insurance increase would incur a cost of £75 million for the sector, which it states employs 133,000 individuals, representing 5% of the nation’s workforce. The council stated that voluntary organizations “cannot afford additional financial pressures,” further noting, “Many have already had to subsidise public services with their own funds, and increasingly we are hearing of organisations having to close their doors.” The Coalition of Care and Support Providers in Scotland reported that the announcement of the tax increase had generated “panic” and would prove “catastrophic” for its members without the provision of compensation or exemptions. Universities Scotland indicated that the National Insurance increase is anticipated to cost higher education institutions approximately £30 million. In a statement released this week, it added: “Against a backdrop of long-term decline in funding, increased costs of this scale cannot be absorbed without a settlement for Scotland’s universities that is commensurate with the challenges we face.” The Scottish government is scheduled to unveil its budget for the upcoming financial year on 4 December. The UK government has not yet confirmed the extent of compensation devolved administrations will be allocated to cover public sector employer costs, which would be in addition to the £3.4 billion in extra funding declared in the autumn Budget. A spokesperson mentioned that further information would be provided “in due course”. The Treasury has stated that the autumn Budget delivered tax relief for charities and their benefactors totaling just over £6 billion for the tax year concluding in April 2024. A spokesperson further remarked: “The government will protect the smallest businesses by increasing the Employment Allowance to £10,500 which means that next year 865,000 employers will pay no NICs at all.”