One of the government’s objectives is moving to a high wage, low welfare, low tax society. They no doubt see the introduction of a national living wage as a key part of this. It will be set at £7.20 per hour from April 2016 rising to £9 per hour by 2020. While the annual employment allowance is to increase to £3,000 and corporation tax rates reduce to help offset this only the employment allowance will be available to charities so there will inevitably be an increase in costs.
The 58 per cent increase in insurance premium tax will also add to costs. It is, however, the measures to cut the welfare bill that will have the biggest impact either through a reduction in income (particularly for housing charities as a result of the reduction in rents) or an increase in demand from beneficiaries. Freezing most working age benefits, reducing the household benefit cap and changing child benefit rules will all affect family income. The national living wage and increases in personal allowances are no doubt aimed at redressing the balance but these will take time to work through leading to an increase in demand for charity services.
It is, though, a symptom of how much it has grown that in her reply Harriet Harman admitted that a Labour Government would also had to have cut the welfare bill.
Please contact Nick Sladden, if you would like to discuss this any further.