Charity sector bodies have written an open letter to Chancellor of the Exchequer Rachel Reeves calling for action to protect charities from increased costs caused by a rise in employers’ national insurance contributions.

They estimate the increase will lead to an annual additional bill for charities of £1.4bn.

Reeves announced the rise in Labour’s first budget last week amid concern from charities that the move could lead to job losses and reductions in service delivery.

In their open letter to Reeves the NCVO and ACEVO warn her “charities are in a dire situation as they try to meet the demands of rising need in communities while their own costs escalate and funding declines”.

They are calling for an exemption for charities, as has been given to public sector organisations “as essential partners of the state".

“The decision to increase employer national insurance contributions (NICs) - and not to carve out an exemption for them - will place another major strain on charities at a time when we are already struggling,” warns their letter, which they are urging others in the sector to sign.

Their letter adds: “Our sector will have less flexibility than ever before to absorb these increasing costs. Many of us will have to make difficult choices in the coming months as a result.

“The harsh reality is that many organisations may be forced to reduce staff, cut salaries, and most importantly, scale back services for the very people they strive to support.”

It also reminds Reeves of the launch this autumn by Prime Minister Keir Starmer of a civil society covenant, which pledges greater collaboration between ministers and charities.

“We are wholly committed to fostering a stronger partnership with the government to ensure that future budgets fully consider the vital role of charities in delivering essential services,” states their letter.

“Our work with the Prime Minister and the Secretary of State for Culture, Media and Sport on the covenant - as a new agreement to reset the relationship between the voluntary sector and all levels of government – is key to this."

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