National Insurance Contributions (Secondary Class 1 Contributions) Bill

Lord Scriven Excerpts

Committee stage
Tuesday 21st January 2025 Grand Committee

Moved by

[Lord Scriven]

1: Clause 1, page 1, line 1, at end insert—
“(A1) In section 9(1A) of the Social Security Contributions and Benefits Act 1992, after paragraph (aa) insert—“(ab) if the employer is a specified employer under subsection (1B), the specified employer secondary percentage;”(A2) After section 9(1A) of that Act insert—“(1B) A “specified employer” means—(a) a person providing a care home service or a domiciliary support service who is regulated under—(i) Part 1 of the Health and Social Care Act 2008,(ii) Part 1 of the Regulation and Inspection of Social Care (Wales) Act 2016, or(iii) Part 5 of the Public Services Reform (Scotland) Act 2010,(b) a person contracted to provide primary care under the provisions of—(i) Part 4 of the National Health Service Act 2006,(ii) Part 4 of the National Health Service (Wales) Act 2006, or(iii) sections 17J to 17O of the National Health Service (Scotland) Act 1978,(c) a person contracted to provide general dental services under the provisions of Part 2 of the National Health Service (General Dental Services) Regulations 1992,(d) a person contracted to provide pharmacy services under the provisions of—(i) Part 7 of the National Health Service Act 2006, or(ii) Part 8 of the NHS (Pharmaceutical and Local Pharmaceutical Services) Regulations 2013, or(e) a charitable provider of health and care, or(f) a person providing hospice care whether in a hospice or elsewhere.(1C) For the purposes of this Act, the specified employer secondary percentage is 13.8%.””Member's explanatory statement
This amendment, together with Lord Scriven’s amendments to Clause 2, page 1, line 12 and Clause 2, page 1, line 14, provides that care providers, NHS GP practices, NHS commissioned dentists, NHS commissioned pharmacists, charitable providers of health and care, and those providing hospice care would continue to pay contributions at current rates.

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[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.

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[Lord Forsyth of Drumlean (Con)]

My Lords, as we have heard, it is rather unusual for a Bill that will have such a devastating impact on our country, businesses, charities and so on to have its Committee stage in Grand Committee. Normally, we would have it on the Floor of the House. It is certainly true that past national insurance Bills have been taken in Grand Committee, but it is distressing that the Government have chosen to push this Grand Committee to consider a very controversial Bill that will affect many groups of people. It should be taken on the Floor of the House.

I hope that this is neither a precedent nor a move that drives us in the direction of the House of Commons, which moved towards the timetabling of Bills, and proper scrutiny of important Bills, on the Floor of the House. We are familiar with the consequences of that: us having endless amendments to legislation that has not been properly scrutinised. If this was about saving time, I do not think it is going to work, because the fact that we cannot have votes in this Committee will mean us spending, perhaps unnecessarily, rather a long time on Report. Of course, the whole point of Committee stage is that it enables a bit of to and fro and discussion under the rules that apply in that respect.

I find myself in an unusual position in the Grand Committee, speaking on a highly controversial Bill, devastating in its consequences. The Minister is keen on telling us about black holes and this creates an enormous black hole in the delivery of public services and for businesses up and down the land. The unusual position in which I find myself is being in complete agreement with the noble Lord, Lord Scriven. I started to make notes to find something that I thought he had got wrong, but I could not say anything until I looked at the amendment, because the flaw in his erudite and proper analysis of the damage that will be done to GPs, social care, pharmacies, hospices and others is the distinction that he makes between the public and private sectors.

Apparently, if one is doing this in the private sector, it is okay to slap on a great tax that means one has to consider dismissing staff and so on. But if it is in the public sector, that is completely unacceptable. This is particularly egregious, although I think, and the noble Lord will correct me if I am wrong, he makes an exception for the provision of care home services in the private sector. I am not sure if that is right. I shall happily give way to him if he thinks I have got it wrong. In other respects, however, it is all about giving—

[Lord Scriven (LD)]

My amendment is clear. It is not just about the public sector. It talks about anyone who is contracted, which could be in the private sector.

[Lord Forsyth of Drumlean (Con)]

Yes, but that that completely removes the private sector providing, for example, social care. A report on social care from the Economic Affairs Committee, which I chaired some time ago, was very much endorsed by the House as a whole—there was unanimous agreement across the House. It made clear what is happening in private care homes, for example. People who are paying their own fees, as opposed to them being paid by the local authority, are being charged up to 40% more to subsidise people who are in those homes as a result of the local authority. Here we have a situation where the burden is placed even more strongly on people providing care out of their own savings and resources.

It seems to me that a distinction is being made between the elements that are providing care. For example, in dentistry, every time I go to the dentist—I see him every six months, when he has me in a position of some vulnerability—he tells me that he is unable to take on NHS patients because if he does so, the amounts he is allowed to charge mean that he is making a loss. That loss occurs because of staff and other costs, which will increase as a result of these measures. That will mean that the problem of getting dental care in the NHS, which is acute at present and even more acute for people with particularly severe orthodontic conditions, will get worse. He tells me, for example, that people can wait until their teenage years before they get treatment, and then they have to show that they have had treatment for the previous few years. If they have not had that, they are no longer eligible. The result is that people do not get treatment at all. Everyone knows that NHS dentistry is in crisis. As the noble Lord, Lord Scriven, pointed out, this will make it even worse.

Then we have the issue of the hospices. The noble and learned Lord, Lord Hope, mentioned the case of Cyrenians and I would be remiss if I did not. My noble friend Lady Goldie asked me to mention the letter that she received from that organisation, and the noble and learned Lord highlighted the fact that this will mean £171,000 extra for a charity—not a big one—which is struggling. When I was Health Minister in Scotland a million years ago, I introduced pound-for-pound funding for hospices, whereby the Government would match the funding raised by the hospices. That was hugely successful but subsequently repealed by the Scottish Parliament when it came into action. Hospices are organisations that we should be supporting. We should not be thinking of new taxes on the people that they have to employ, although of course they benefit from many volunteers.

The whole Bill is deeply misguided and, as the noble Lord pointed out, will have a devastating effect, not just on private providers but on all providers and charities. I remind the noble Lord that had we had his excellent amendment on the Floor of the House, we could have divided on it and sought the opinion of the whole House, but because we are put in here, we are unable to do so. That is a great disservice. Of course, it means that the Liberals—

[Lord Forsyth of Drumlean (Con)]

Well, I am not so sure about the “democrat”, but they are certainly called Liberal Democrats. They will be able to say, “We raised your concerns”, but they raised our concerns in a way that made it difficult to have the rules of engagement that would enable us to refine those amendments in Committee.

I hope that in considering his amendment, the noble Lord, if he takes it a stage further—I do not anticipate that the Government will accept it—may take account of the concern that it is not just about the public sector but the private sector. Bear in mind that this is just one measure on top of others—the increase in the minimum wage and the employment rights legislation—that will make it much more difficult for people to be flexible in their labour arrangements. All these things together are crushing these important public service organisations.

I support the amendment, but I hope that the noble Lord might think further on the contribution made by those private providers providing services to people who pay from their own pockets.

[Lord Scriven (LD)]

My amendment, in proposed new subsection (1B), says:

“A ‘specified employer’ means … a person providing a care home service”


under the Health and Social Care Act 2008. So that will cover a private care home, not just a public sector care home. Would the noble Lord agree?

[Lord Forsyth of Drumlean (Con)]

I would agree, but it would not provide for the costs of private patients, who are already paying over and above the odds because of the local authorities. I am not criticising the local authorities—in fairness to them, they simply do not have the money. More than three-quarters of councils’ budgets are going on social care, and the costs are going up. This is extending the cost, and therefore it will mean a greater burden on those people paying out of their own pockets.

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[Lord Livermore (Lab)]

I would be very happy to look into the specific point made by the noble Baroness. I will feed back in my responses on a subsequent group.

[Lord Scriven (LD)]

My Lords, this has been a fascinating debate—no more fascinating than my thinking I was in total agreement with the noble Lord, Lord Forsyth, until he started arguing why he did not support me. I do not feel that I have to resign from my Front-Bench position, for which I thank the noble Lord.

I have listened carefully. I believe that, regardless of which side of the Grand Committee noble Lords are on, everyone is agreed that the Bill will have consequences, both for health and social care providers and, through them, for the people who receive such services. I note that the Minister said that he had listened very carefully; I am sure that the sector and providers, who are listening carefully to this debate, will have noticed that he did not come up with any solutions to the problems they now face, such as the cuts to staff and services that they will have to make.

I also note that, in his response, the Minister did not refer to community pharmacists’ contract negotiations, which have been on hold for this financial year since the general election. They are still dealing with a lack of contract and uplift for this year, regardless of the uplift and extra costs that will come next year. As a former NHS manager, I know that the flaw in the Minister’s response about this measure being part of contract negotiations is that everything gets bundled into contract negotiations—not just this year’s pressures but the extra services that the Government will look to provide. Therefore, this amount of money will not be covered and the Government’s decision will create both pressures on and gaps in existing services.

I appreciate that the Minister gave the context, which is important, but it is the Government’s decision on how to deal with that context and the taxes that they decided to raise against these providers that are causing the problem. This is a government issue that will not go away and will put pressures on services; that is why, even though I beg leave to withdraw my amendment, believe that we will come back to this issue on Report. I look forward to the noble Lord, Lord Forsyth, supporting a vote then.

Amendment 1 withdrawn.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Lord Scriven Excerpts

2nd reading
Monday 6th January 2025 Lords Chamber

[Lord Scriven (LD)]

To govern is to choose. That is what the Labour Government have done: they have chosen to implement an increase in national insurance contributions, with a 1.25 percentage point rise for many providing care and support in health and social care sectors. That choice has implications for the provision of health and social care, and the Government either are ignoring those impacts or have no idea of the consequences of NIC increases on NHS dentists, NHS community pharmacists, hospices, NHS GPs and social care providers. Any policy that impacts the financial ecosystem of health and social care deserves close scrutiny, which is what I will focus on in my contribution to this Second Reading debate.

The ripple effects of this NIC increase will be felt across the entire sector, from GPs and community pharmacists to hospices, dentists and social care providers; every corner of the health and care system will experience the impact. Of course, it is important to consider the context of the NHS and social care system left to the nation by the previous Conservative Government. Having listened to a few contributions from the Conservative Benches, I think a sense of self-reflection is needed to work out exactly what was left: a backlog of 7.75 million people waiting for NHS treatment in England; a recruitment and retention problem for healthcare and social care professionals and a failure to tackle workforce shortages; and an inability to stabilise care provision that left some care providers on the brink of insolvency.

Today, many GP surgeries are already struggling with financial pressures and workforce shortages. The British Medical Association has warned that the increase in employer national insurance contributions will exacerbate those issues. Practices will be forced to allocate more funds to staffing costs rather than patient care. As my noble friend Lady Kramer pointed out, research by my own party has revealed that the NIC hike could end up costing GP surgeries the equivalent of more than 2 million appointments a year because of the additional £125.5 million bill inflicted on them.

Community pharmacies, often the first point of contact for minor illnesses and health advice, already operate on tight margins. The new national insurance contributions increase will mean an extra £50 million per annum for this sector. According to the National Pharmacy Association, rising national insurance costs could push small pharmacies into unsustainable financial territory, threatening accessibility for patients.

Hospices, which rely heavily on charitable donations and limited government funding, may also face increased financial strain. Research has highlighted that the additional costs of the NIC hike will force hospices to scale back services if they cannot attract more public donations. The cost to the average hospice is likely to be in the region of £200,000 per year.

The British Dental Association has expressed concerns that rising costs will further discourage dentists from providing NHS services, worsening the existing crisis in dental care availability.

Social care is also set to be pummelled by the rise in national insurance contributions. I declare my interest as a vice-president of the Local Government Association. It has emphasised that the social care sector, already facing a staffing crisis and chronic underfunding, will struggle to absorb these additional costs without significant reform.

The scale of the consequences of the NIC rise is worrying; it will destabilise many providers of health and social care. According to the LGA, councils in England face a combined social care funding gap of £3.6 billion. As welcome as the extra £600 million announced in the Budget for social care is, it will not even touch the surface of the problem. Also, according to the Nuffield Trust, the extra NIC increase for social care will add some £900 million in extra costs to the sector, which is more than the £600 million that the Government have put into social care. Was the £600 million meant to cover the social care costs or to ease the cost pressures that were already in the system before the NIC increase?

The British Dental Association reports that 40 million NHS dental appointments were lost during the pandemic. It points out that the additional financial pressure of the NIC hike is likely to further limit recovery efforts and drive more dentists away from NHS provision.

Before the increased national insurance costs were announced, a survey by the National Pharmacy Association found that 72% of small pharmacy owners were worried about their ability to stay afloat in the next five years. The average cost to a community pharmacy of this increase has been calculated at just over £12,000. One community pharmacist asked me to ask the Minister what she should do, as this national insurance increase will mean her having to sack 1.5 members of her staff or close for the equivalent of one day a week. What advice would the Minister give to her and to other pharmacists in a similar situation?

We on these Benches feel that this national insurance increase on health and social care provision would be self-defeating and have the unintended consequence of inflicting more misery on patients and those needing social care. We urge the Government to urgently rethink this increase in national insurance or risk the ability of some providers to continue providing the same level of care. The Minister must surely recognise that this national insurance hike will only pile more pressure on to our health and care services, which are already under enormous strain.

The Government must urgently rethink this decision, make an exemption from this hike for vital health and care providers, and not burden GPs, dentists, community pharmacists, hospices and care providers with higher costs that some will find impossible to fund. It is no good coming back with the meaningless formula of words that the Government are trotting out parrot-fashion on this issue: “This will be dealt with in the contract and funding arrangements for the next financial year”. We are talking about thousands of small businesses and charities, from GPs to hospices, that are having to make plans on service reductions now due to these NIC hikes. They need to plan and have certainty that these government-imposed increases are covered in full. The Government have made it clear that they will cover in full the costs for NHS trusts. If they can do it for NHS trusts and state very clearly now, with clarity and certainty, that they will not have to pay it, why the two-tier system for GPs, dentists, community pharmacies, hospices and social care providers?

Other choices were available to the Government in dealing with how funding could be raised to spend on health and social care, rather than this self-defeating national insurance contribution hike. My party has proposed alternative funding mechanisms. For example, we proposed several tax reforms to generate additional revenue for the health service and social care. Key proposals included a capital gains tax overhaul, introducing a progressive structure with three bands. This reform would have raised approximately £5 billion for health and social care. Implementing higher levies on banks and the very affluent would have raised an extra £9.8 billion package for social care and the NHS. Exploring these options could create a more equitable and effective funding system without clobbering health and care providers with these unsustainable extra costs.

The increase in national insurance contributions seems to represent a “make it up as we go along” policy by the Government when it comes to the effects on the health and social care sector. It brings significant challenges to many health and care providers, with no clarity or certainty from the Government. The Government must now say whether and how they will fund the full national insurance contribution hikes for GPs, hospices, community pharmacies, NHS dentists and social care providers, address the unintended consequences and give certainty in the planning of services that are now being made. Failure to do so will lead to further problems for our NHS and social care services that will have a negative impact for those seeking care.

The Minister can choose today to give certainty to those people and businesses that they will be exempted from this national insurance contribution hike. Failure to do so will mean that jobs and services will be reduced, as people are planning now. If he does not give that assurance, I will support my noble friend’s amendment if she presses it.