Budget hits disability charities as one in three to hand back government contracts

Disability charities will reportedly face a £266 million annual shortfall thanks to National Insurance and minimum wage changes. 

Disability charities will not be able to continue to fund this type of additional input if the organisation is losing money”

“Many years of below-inflation increases in funding have pushed these organisations to the limit”

“Evidence shows that every £1 invested saves £3 in longer-term costs across the health and care system”

One in three disability charities in the UK plan to hand back government contracts in the wake of the Labour’s Autumn Budget, it has been reported.

Research published yesterday (15 December) warned of “devastating service cuts as disability charities face [a] £266 million shortfall”.

The research – commissioned by the Voluntary Organisations Disability Group (VODG) and carried out by consultancy and research firm Cordis Bright – highlighted rises in National Insurance and the National Minimum Wage as being factors in the predicted shortfall.

VODG said that some of the key findings from the research included:

• One in three disability charities poised to hand back local government contracts
• A quarter considering redundancies due to soaring staff costs
• Over 60% expect a financial deficit by March 2025
• Charity exemptions are needed to secure the rights of disabled people

The organisation added that the estimated £266 million shortfall would be “far higher” if it wasn’t for the fact that most respondents to the survey already pay above the minimum wage.

Tom Noon, chairman of Cordis Bright, commented: “There is often a myth that not-for-profit organisations can somehow find ‘other sources’ of funding. In reality the disability charities we heard from are providing a public service funded by the state. This is not a lucrative activity, and many years of below-inflation increases in funding have pushed these organisations to the limit of sustainability.

“Local authorities derive significant benefit from the willingness of not-for-profit organisations to contribute to the costs of what some might describe as ‘extras’ but others would see as integral to good-quality provision. Disability charities will not be able to continue to fund this type of additional input if the organisation is losing money.”

A similar Laingbuisson report, created in collaboration with Care England and the Homecare Association, has shown a similar impact of the budget on state-funded care services.

While these are not charities, the majority of their service-users are state-funded, and the report shows that the fee rates are so low they are rendering many formerly successful businesses unsustainable – especially small and medium-sized enterprises (SMEs).

Commenting on the research, Martin Green, chief executive of Care England, said: “The government is ignoring or not caring about the serious harm their policies are causing. When care providers fail, it's not just businesses that collapse; it's entire support systems for people needing and receiving services. The human and economic cost will be devastating."

William Laing, chief executive of LaingBuisson, added: "Our data are from the statutory accounts of providers large enough to post profit and loss. These show providers supporting the state-funded market are struggling. SMEs face an even more challenging situation."

By way of resolution, the Homecare Association put forward four suggestions to the government:

• Invest at least £2.8 billion in the care sector to mitigate these risks. Evidence shows that every £1 invested saves £3 in longer-term costs across the health and care system;
• Exempt care providers from changes to employer's national insurance contributions;
• Ensure a multi-year funding settlement for social care to meet future demand and cover the full cost of care (estimated £18.4 billion needed by 2032/33);
• Implement a ‘National Contract for Care’ service that sets a minimum price for care services. This will ensure public sector commissioners pay the full cost of quality care.

As noted by Martin Green, the human cost of this move from the government will arguably be even greater than the economic cost. It remains to be seen whether the sector’s pleas will fall on deaf ears.