National Insurance Contributions (Secondary Class 1 Contributions) Bill

Debate between Lord Randall of Uxbridge and Lord Scriven

Committee stage
Tuesday 21st January 2025 Grand Committee

[Lord Scriven (LD)]

My Lords, I rise to speak to Amendments 1, 16 and 19, which stand in my name and are supported by my noble friend Lady Kramer and the noble Lord, Lord Randall of Uxbridge. These amendments address the implications of the national insurance contribution increase on independent contractors, small businesses and charitable providers of health and social care. The purpose of the amendments is clear: it is to exempt essential providers from the impact of the national insurance contribution hike.

Let us first consider what this increase means for a sector that forms the backbone of community healthcare: pharmacy, dentistry, optometry, hospices, GP surgeries and social care providers. These vital services, already under immense financial pressure, are struggling to meet the growing needs of our community. By imposing additional financial burdens, the Government risk undermining their ability to deliver care, with potentially devastating consequences for both providers and the people they serve.

Research by my party reveals some stark issues. For GP practices, the national insurance contribution will cost an estimated £125.5 million annually, equivalent to more than 2 million lost GP appointments each year. At a time when some people already endure long waiting times, this is simply unacceptable. In social care, the Nuffield Trust estimates an annual cost increase of £900 million due to the national insurance contribution increase, yet the recent Budget allocated only £600 million per annum to this sector, leaving a £300 million funding gap. This financial black hole threatens to push some providers towards collapse, reducing access to support keeping individuals independent and out of NHS care.

Hospices, which provide compassionate care to terminally ill individuals and their families, face an additional annual cost of £30 million. Some hospices will need to raise as much as an extra £200,000 each year. With many already heavily dependent on donations, such increases could force them to scale back services, lay off staff or even shut down some services entirely.

Community pharmacists, already operating on razor-thin margins, will incur an average additional cost of £12,000 per pharmacy annually. These pharmacists are vital lifelines for millions, yet the national insurance increase threatens the very survival of some of them.

Dentists facing rising costs could lead to higher patient charges and reduce access to NHS care. At a time when NHS dentistry care accessibility is already in crisis, the Government’s decision will exacerbate the problem, potentially creating further dental deserts across the country.

It is worth noting that the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Altrincham, have tabled Amendments 45 and 61, which are not in this group, proposing to increase the employer allowance for dental practices and requiring a review of the impact on certain sectors, including dentistry. However, the employment allowance, regardless of its level, is unavailable to dental practices that derive more than half their income from NHS services. Without a targeted exemption for the national insurance contribution hikes, NHS dental practices may be forced to reduce their NHS commitment to below 50% to qualify for support, with dire consequences for patient access. It is patients who will ultimately pay the price if the Government fail to act.

When we weaken our health and social care providers, the consequences are felt by individuals and communities. Fewer GPs, or fewer GP services, mean more crowded A&E departments. A reduction in social care providers leaves vulnerable individuals without support to live independently. Cuts to hospice services deprive families of the comfort and dignity they need during their most difficult moments.

The Government’s national insurance increase treats commissioned non-state providers of NHS and social care as though they were just ordinary businesses rather than essential public service partners. It fails to recognise their unique role in safeguarding the health and well-being of our nation. The economic rationale for this policy is flawed. By burdening health and social care providers with additional costs, the Government risk reducing services or, in extreme cases, forcing closures. This in turn will increase pressure on already overstretched NHS emergency services, leading to longer delays, worse health outcomes and higher long-term costs for the taxpayer.

This national insurance contribution increase on health and social care providers is penny-wise and pound-foolish policy-making at its worst. The solution is straightforward: reverse the national insurance contribution increase for health and social care providers that are commissioned by the state. This is not just a financial necessity; it is a moral imperative. These providers are already planning staff redundancies, service reductions and potential closures. They need certainty that their funding will be adequate from April, and fully funded, and that it will cover the additional costs. It would be deeply disingenuous for Ministers to suggest that the providers can absorb these costs or deal with the uncertainty if the Minister cannot guarantee that they will be funded. They will have significant effects on the ability of these providers to provide business continuity.

The Treasury may conduct abstract modelling, but the reality on the ground is stark. Front-line health and social care providers are directly affected and making plans now. These service providers are making plans today to reduce staff numbers and reduce access to services. The thousands of small businesses, independent contractors and charities need certainty that the money will be there from April and fully funded. Hollow and shallow words to the effect that this is all part of the normal contract negotiation, or part of the wash-up of next year’s funding settlement, will not stop the notices of reduced hours or redundancies going out. It will not stop the changes in opening hours or reduced access to services that are now being implemented.

We need to ask: why the two-tier system? If the direct state providers of NHS care that provide services can be treated in a different way—in that, where normally they would be told it is part of a contract negotiation, they have been told with certainty that this provision will be funded—why not provide the same certainty now for non-state providers? After all, they treat the same people and patients, providing care and support in our community.

The cost of exempting these providers can and should be through a fairer taxation system. My party has proposed raising the money required by reforming taxes on large, profitable corporations, particularly in the technology, financial and gambling sectors. For example, a modest increase in the digital services tax would generate significant revenue while not placing essential services at risk. The national insurance hike that the Government are proposing undermines the very providers who care for our sick and elderly and our most vulnerable. If implemented, they will jeopardise community health and social care and endanger the futures of countless essential services.

The Government have the power to change course. By reversing the national insurance increase for these vital providers and adopting a fairer, more sustainable approach to raising revenue, they can protect the thousands of small businesses, independent contractors and charities that safeguard our nation’s health and well-being. I urge the Government to act now and I beg to move.

[Lord Randall of Uxbridge (Con)]

My Lords, I have added my name to the amendments tabled by the noble Lord, Lord Scriven, and the noble Baroness, Lady Kramer. Over 30 years ago, as an MP I went to see my predecessor, complaining that Governments do not understand small businesses. At that time there was a Conservative Government, who did some things to rectify that position. Ten years ago, the family business, of which I was the chairman, closed. I am grateful that I closed it when I did; we did not have to put up with Covid, Brexit or this type of thing.

I am saying this because I am not sure that Governments understand small businesses. The pharmacies, dentists and GPs we are talking about here are small businesses. I have always described the Treasury as being like your parents, who do not let you have the things that you want because they say you cannot afford them, but the damage that it could do with this increase in national insurance contributions will be devastating for pharmacies, GP practices, hospices and others.

In the other place, when Members of Parliament want to get beneath the skin of people on the other side, they occasionally say such things as, “What about the sick and dying?” I have heard that quite a few times. In this case, I have to say that those are the people who will suffer because of this increase. I do not have the financial wisdom to know whether the suggestion put forward by the noble Lord, Lord Scriven, about how to raise the money is viable. However, I have to say that this measure being put forward is not the correct one, because it will have such an adverse effect not just on those businesses but on the people served by them.

I know that Governments never give way on these things—I have been around long enough to know that that is the last thing they would do—but I urge the Government to have another look. I do not expect them to accept the amendments today—they may come back with an improved version—but they must look at this seriously, because it is a mistake. We will come on later to charities, which is another big issue, but for the moment we are talking about what is contained in these amendments and I urge the Government to think long and hard about what they are doing.