By Professor Peter Jones MBE: When Government Tax Policy Hurts Society’s Most Vulnerable.
As the government implements its increase in employers’ National Insurance contributions, a concerning pattern is emerging that threatens to undermine support for some of society’s most vulnerable individuals.
While the policy aims to generate additional revenue for public services, its blanket application to all employers is having a disproportionate impact on specialist disability charities – organisations that actually reduce long-term pressure on public finances.
The Hidden Impact
Consider The Crumbs Project, a disability training charity that helps adults with learning disabilities, mental health challenges, and stabilised addiction issues develop skills for independent living and employment. Like many similar organisations, they operate with necessarily high staffing ratios to provide appropriate support for vulnerable individuals. With annual salary costs of around £270,000 supporting 17 specialist staff, the NI increase represents a significant new burden.
Unlike commercial organisations, these specialist charities cannot simply pass increased costs onto customers. They operate in an increasingly competitive funding environment where many grant-making trusts explicitly exclude core operating costs from their support. The result? A reduction in capacity to deliver vital services that transform lives and save public money.
The False Economy
The economics present a stark picture. Research indicates that supporting a person with moderate learning difficulties from age 16 to 64 typically costs the state £2-3 million. Helping these individuals achieve semi-independent living saves approximately £1 million per person, with an additional £170,000 saved when they access employment. By reducing charities’ capacity to provide these services, the NI increases risks, creating substantial long-term costs to achieve relatively modest short-term revenue gains.
A Wider Pattern
This is not an isolated case. Across the country, specialist disability charities are facing similar challenges:
- Reduced capacity to provide specialised support
- Increased pressure on already stretched resources
- Growing difficulty in maintaining necessary staffing ratios
- Compromised ability to deliver long-term savings to public services
The sector is particularly vulnerable because:
- It requires higher staffing ratios than many other charitable activities
- Staff need specialist skills and experience, limiting flexibility
- Commercial income generation is often restricted by their focus on training and support
- Their service users often require consistent, long-term support
A Better Way Forward?
The solution need not compromise the government’s revenue objectives. Targeted relief mechanisms for registered charities working with disabled individuals, where demonstrable long-term savings can be evidenced, could protect vital services while maintaining the broader policy goals. Enhanced tax relief or Gift Aid arrangements for charities providing recognised training and support services could help offset the impact.
The Role of Evidence
Recent recognition of organisations like The Crumbs Project through sector awards demonstrates the quality and impact of their work. Their trainees progress to employment and independent living, reducing dependency on state support and contributing to the economy. However, this success relies on maintaining appropriate staffing levels and specialist support.
Questions for Policy Makers
As this policy beds in, several questions need addressing:
- How can we protect vital charitable services while maintaining fiscal objectives?
- Should disability-focused charities receive special consideration given their unique staffing requirements?
- How do we balance short-term revenue generation against long-term societal costs?
- What mechanisms could help offset these unintended consequences?
Time for Review
While the intention behind increasing National Insurance contributions may be sound, its unintended consequences on disability charities risk creating a false economy. By inadvertently reducing the capacity of organisations that decrease long-term public spending, we may be sacrificing pounds to save pennies.
The government now faces a choice: allow these unintended consequences to play out, potentially increasing long-term costs to the public purse, or develop targeted solutions that protect vital charitable services while maintaining overall fiscal objectives. The answer will reveal much about our priorities as a society and our commitment to supporting those most in need of our help.
The time for such a review is now before the reduced capacity of these essential charitable services creates gaps that will prove far more costly to fill in the future.
Note: I am Chair of Crumbs, a disability charity that provides hospitality and catering training for adults with learning and other mental disabilities. It is also a recognised Disability Confident Leader that can provide advice and guidance to employers. For further information visit here, or send an email to contact info@crumbs.org.uk.
