National Insurance Contributions (Secondary Class 1 Contributions) Bill

Debate between James MacCleary and David Chadwick

Committee of the whole House & 3rd reading
Tuesday 17th December 2024 Commons Chamber

[James MacCleary (Lewes) (LD)]

I have to start by disappointing the hon. Member for Chipping Barnet (Dan Tomlinson), in that I rise to support the amendments tabled by my hon. Friend the Member for St Albans (Daisy Cooper). I will speak about my deep concerns about the proposed national insurance changes because of the real-world impact they will have businesses, GP surgeries, community organisations and vital care services in my constituency of Lewes. While I recognise the fiscal pressures, which have been mentioned by a lot of Members, I ask that we fully consider how these changes will affect those working tirelessly to keep our communities vibrant, secure and healthy.

GP surgeries are the frontline of the NHS. A local GP practice in my constituency has been in touch with me just today to describe its shock at discovering that it will be paying at least £60,000 more a year under these changes. GP practices provide vital healthcare services to our local population and in doing so are under ever-increasing pressures. Yet under the new proposals, GP practices are treated as if they are private businesses capable of absorbing significant cost increases. The reality is, of course, quite different. Every additional £1 spent on national insurance is £1 that is not spent on patient care, staffing or critical medical equipment. For practices already operating under immense strain, this extra burden could be the tipping point that pushes them towards unsustainable financial territory. When cutbacks occur, it is our communities that will lose vital healthcare access, and the NHS, which is already stretched, will be left struggling even more.

We must also acknowledge that our social care providers, including hospices such as St Peter and St James hospice, which looks after my constituents so well—I visited it recently—are caught between rising wages, fixed local authority fees and higher national insurance. They cannot pass on these costs without threatening their very viability. If care providers close or scale back, the most vulnerable in our community will suffer, and so will our healthcare system as hospital stays lengthen and A&E attendances rise. In other words, it will drive up costs for the NHS, making the system less efficient and less humane. It is particularly galling that NHS employers are set to be compensated for the changes while there is no equivalent commitment for the social care sector. Separating social care reform from NHS support will not only hurt vulnerable people today, but make it impossible to achieve strategic priorities for the health service tomorrow.

We must also consider community organisations. Take the Sussex Community Development Association in my constituency. It is a local organisation that reinvests every penny of surplus into essential services such as youth work, emergency food provision and childcare for deprived communities in my constituency. It is already contending with increased wage costs, and it now faces an estimated additional £70,000 per year due to the national insurance rise. Because of its size, it does not qualify for allowances that might soften the blow. This facility was invested in to deliver Sure Start services under a previous Labour Government, and it is now considering cuts to essential services thanks to this one. It now faces a desperate scramble for funding at a time when its services have never been more crucial.

The rise, coupled with the increases to the national living wage and the minimum wage, will hit the early education and childcare sector particularly hard. As chair of the all-party parliamentary group for childcare and early education, I must make the Committee aware of how dire the situation is. An average nursery will face additional staffing costs of nearly £40,000 a year due to the increases. That is because staffing costs account for 75% of nurseries’ running costs, compared with just 30% for the average restaurant. If Government funding rates do not cover the gap, parents will face higher fees, potentially leaving them to reduce their working hours or to leave the workforce altogether.

The situation is exacerbated by the fact that private nurseries delivering Government-funded hours may not be eligible for employment allowance. That means that they may not receive the intended financial support from the Government. The sector is already facing recruitment challenges, with 29,000 new staff needed by September 2025 to deliver the promised 30 hours of funded childcare. The national insurance changes could lead to recruitment freezes, reduced staff training and even nursery closures. That is the precise opposite of what this Government claim they want to see for working parents and carers. That would have a detrimental effect on families and the economy, hindering economic growth, and it could seriously impact the Government’s commendable aim of having half a million more children hitting early learning goals by 2030.

Finally, let us not forget that even successful local businesses are feeling the strain. Rathfinny, a renowned Sussex wine producer in my constituency that has invested in our local economy and environment, faces a significantly higher national insurance bill. It may be forced to slow its growth, reduce investment or even curb local employment opportunities, undermining the prosperity that benefits us all. This Government talk about economic growth, as Government Members have done today, but this tax increase will inhibit the ability of many British businesses to expand and flourish.

If introduced without nuance, these national insurance changes risk delivering a series of damaging shocks to my community and places across the country. I urge the Government and the Minister to reconsider, to review the thresholds, to consider exemptions for sectors that cannot pass on costs and to ensure that our GP practices, childcare providers, community organisations and valued local employers are not left shouldering burdens they cannot bear. I implore the Government to recognise the unintended consequences and to commit to measures that will preserve local jobs, sustain our community services and uphold the quality of care we offer our vulnerable citizens. I hope that the Government will do more to ensure that this tax increase does not harm the very communities and services we have pledged to serve and protect.

[David Chadwick]

The Liberal Democrats agree that the country’s finances are in a mess thanks to the previous Conservative Government. However, we do not agree that increasing national insurance is the way to address the problem, as doing so will undermine efforts to improve public services across the United Kingdom. For example, last month Care Forum Wales issued a stark warning that the rise in national insurance could cause a collapse in the social care system in Wales, creating a £150 million funding gap. Social care in Wales is already on its knees. Over the past four years, 40 Welsh care homes have closed. If yet more are forced out of business due to increased costs, we will have even fewer social care spaces available. We know that the scenes of ambulances left queueing for hours outside our hospitals are the result of them being unable to discharge patients due to shortcomings in social care.

It is not just care homes that are affected, but primary care too. Our GPs, dentists and pharmacies will suffer from this tax rise. A local GP practice in my constituency told me that it will have to cut one day of practice nurse time and one day of GP time from April 2025. That is a direct result of the projected £30,000 increase in its national insurance bill, alongside an overall lack of funding for GPs. A second surgery is projected to have an increase in its NI bill greater than £100,000 in April 2025. Both are clear that without an exemption for health and social care providers, the NHS in Wales could face collapse. It already has the worst outcomes of any nation across the United Kingdom.

Charities and local authorities will suffer too from this decision. In my constituency, the chief executive officer of Powys Association of Voluntary Organisations has stated that the national insurance increase will

“place considerable financial pressure on voluntary sector organisations, many of whom are crucial partners in delivering essential services.”

That is the reality of the decision taken by the Government to use such a blunt tool to try to fix the nation’s finances. Many of my constituents are asking why Labour has chosen to go after the small businesses, charities, and health and social care providers rather than target the big banks, the oil and gas giants, or the social media giants. I urge the Government to reconsider their decision to raise income in this manner and to make exemptions for the health and social care sectors as well as for charities.