Homelessness charities warn National Insurance changes could take £60m away from frontline services

Changes to National Insurance announced in the Budget could take £60m away from frontline homelessness services and threaten their future, charities have warned.

A total of 110 chief executives, in a letter to chancellor Rachel Reeves, warned the sector is facing “a very real threat to the homelessness services that are needed to provide the foundation for future strategic efforts.”

In last month’s Autumn Budget Reeves announced employer National Insurance contributions will go up to 15% from April 2025, while the threshold at which they start paying contributions will be lowered to £5,000.

The letter, co-ordinated by umbrella organisation Homeless Link, said many homelessness services operate a very narrow margin, “driven down by years of competitive tendering” with a significant number delivered by not-for-profit organisations.

It said: “It is in this context that your proposal to increase National Insurance rates is going to cause a significant challenge to the sector and to our ability to prevent and end homelessness.

“We estimate that the NI changes alone could take between £50 and £60m out of the homelessness sector and away from the delivery of frontline services.”

The letter said homelessness services are already under “enormous pressure” with an estimated 64% of providers managing contracts that are no longer financially viable as a result of rapid inflation. The letter said one in three providers have already started reducing services.

The charities call for a rebate or relief for the homelessness charity sector, with government covering the increased costs via an increase in grants and contracts for 2025/26.

It said: “We trust you will treat this matter with the utmost urgency as we are making our plans now for the next financial year – and we want to avoid any unnecessary closure of services with the inevitable impact on people’s lives that will follow. Such an outcome would be an extremely poor start to our efforts to end homelessness together.”

The charities do, however, welcome the extra £230m to tackle homelessness and rough sleeping announced last month and the government’s pledge to develop a cross-party homelessness strategy.

The letter’s signatories include the bosses of Crisis, St Mungo’s and Riverside.

It follows similar warnings earlier this month from housing associations providing care and support, with some providers facing bills of more than a million pounds due to higher numbers of relatively lower-paid care workers being pulled under the new £5,000 threshold.

A government spokesperson said: ”We have inherited devastating levels of homelessness, and we are taking action to get back on track to end this issue for good, which is why in the Budget we took the total spending on reducing homelessness to nearly £1 billion in 2025-26.

“Reducing social inequalities is also vital to fix this problem. Our balanced and proportionate approach will help us raise the money needed to fix public services so that they can benefit everyone, as well as fund the delivery of up to 5,000 social homes.”

The government in a move designed to protect small business and charities, increased the Employment Allowance for NI from £5,000 to £10,500. It believes its plan to ban ‘no fault’ Section 21 evictions will reduce demand for homelessness services along with its plan to reduce Right to Buy discounts and increase affordable homes programme funding by £500m next year.