National Insurance Contributions (Secondary Class 1 Contributions) Bill

Lord Leigh of Hurley Excerpts

Committee stage
Thursday 6th February 2025 Grand Committee

[Baroness Neville-Rolfe (Con)]

My Lords, I rise to move the amendment in my name and that of my noble friend Lord Altrincham, and to support the amendment tabled by my noble friend Lord Leigh of Hurley. These amendments are not merely technical adjustments; they represent a critical step in recognising and supporting the social care sector, which remains indispensable to our society.

Amendment 47 proposes an increase in the employment allowance available to employers in the social care sector, raising it from £10,500 to £20,000 per tax year. This increase is of profound importance. Our social care providers are grappling with rising operational costs, staffing challenges and the ever-present need to deliver high-quality care to some of our most vulnerable citizens. By enhancing the employment allowance, we are providing smaller employers with essential financial relief that will help to sustain their operations in the light of the brutal national insurance increases, retain skilled and valuable staff and invest in the quality improvements that our social care users so desperately need.

For too long, the funding constraints on social care providers have meant that many have had to make painful compromises, such as reducing staff numbers, cutting back on training or deferring vital infrastructure improvements. These compromises ultimately diminish the quality of care provided and place additional strain on an already overstretched system. Increasing the allowance would acknowledge that social care is not a peripheral service, but a core pillar of our public support system, deserving of the same robust backing as the NHS, which is being compensated for the additional NICs charges.

Moreover, this amendment recognises the unique cost structures within the social care sector. Unlike other industries, social care providers face significant regulatory and operational burdens. They must meet stringent care standards, invest in specialised training and often operate in environments where margins are exceptionally thin. They are the backbone of a sector that touches so many lives. The Local Government Association estimates that the NICs charges create £1.77 billion in additional costs for councils, with £637 million for directly employed staff and £1.13 billion through indirect costs, via commissioned providers, including £628 million for adult social care alone. These are big figures.

There is also an important symbolic dimension to these amendments. By focusing on the social care sector, we are sending a clear message that the care of our elderly, our disabled and our most vulnerable is a national priority. This sector has often been on the back foot, underfunded and overlooked. Today we are recognising its importance and taking concrete steps to bolster it. In doing so, we honour the dedication of countless social care workers who deliver care with compassion, often under extremely challenging circumstances.

In conclusion, these amendments will provide a much-needed boost to the employment allowance for social care providers and introduce a mechanism of accountability that will ensure that the measures are delivering the intended benefits. They are a testament to our commitment to support a sector that is foundational in the well-being of our communities. I urge my colleagues to join me in supporting these amendments, recognising that those struggling with disabilities and an ever-ageing community, partly thanks to the miracles of modern medicine, need our help. We need to invest in a stronger, fairer and more caring society.

[Lord Leigh of Hurley (Con)]

My Lords, I rise to support Amendment 47 and my own Amendment 65, which is yet another request for an impact assessment. I raised the issues that small businesses and charities will have at our last session, but I shall focus on the social care sector, for some of the reasons that my noble friend Lady Neville-Rolfe has explained. This sector faces particular challenges, and to apply a one-size-fits-all to every employer in the UK is in this instance simply heartless and smacks of a policy rushed through without proper consideration of the particular issues in the sector.

The recent Budget, while providing additional funding to social care, does not go far enough to meet the needs of a sector facing increased costs from the rising national living wage and employers’ NI contributions. There is the £600 million grant, which we assume is to be shared between adult and children’s social care, but it is far from sufficient to address the estimated £3.7 billion increase in costs facing providers due to the changes announced in the Budget, which represent the 10.6% increase in pay from April 2025.

We know of course that councils will be expected to fill much of this gap through council tax precepts and local revenue, but, even with the £600 million grant, there is still a £1.3 billion shortfall that local authorities have. That figure relates only to the basic costs of providing care, with no consideration of inflation, the resources required to address ongoing workforce challenges, or the increased capacity, as my noble friend Lady Neville-Rolfe mentioned, of a growing ageing population. Because of this, there are reasons to believe that the estimates of a £2.24 billion gap for older person residential care is a conservative figure. If this is added to the homecare deficit, reported to be £1.76 billion, and the unquantified gap for working-age adults, the total gap between the average fee paid by local authorities and the actual costs of providing care could be significantly higher than the £4 billion.

I appreciate that these figures are so large that it is possibly difficult to take them all in and relate to them. If I may, I shall look on a micro basis at organisations I happen to know about personally. I am sure that each of us has a connection with such an organisation locally. In my case, I have connections with Jewish Care, which is Anglo-Jewry’s leading health and social care charity for the Jewish community in London and the south-east. It touches the lives of 12,000 people every week—including, of course, Holocaust survivors.

Jewish Care operates nine care homes, which provide a range of services, including fabulous residential care and also dementia care, mental health care and nursing care. It manages four retirement living schemes and an assisted living scheme, nine community centres and three centres for people living with dementia. My interest is that I was a trustee of Jewish Care, and I am still a proud fundraiser for it. I have been a patron for more than 25 years. I am grateful to Jewish Care for sharing with me its concerns, which reflect those of the whole industry.

In context, Jewish Care raises some £20 million in revenue donations—voluntary gifts. The total increase in workforce costs as a result of this Budget is estimated by Jewish Care at £1.1 million. The increase in the percentage for NICs from 13.8% to 15% increases the workforce costs by £400,000 and the lowering of the threshold, which we all know about, results in a further £700,000—hence £1.1 million.

Of course, it is disproportionately affected because it is a large employer with very many part-time staff. The immediate impact is that carers’ salaries will not be raised, as would otherwise have been the case. It will also force the charity to make choices about how care homes are operated and, just as importantly, to divert investments in other community-focused services. One specific example is that, until the announcement of the NI increases, it was planning to open a much-needed dementia day centre. It was all planned and ready to go, but these additional costs have forced Jewish Care to put that on hold. This is real damage that the Government are causing to people’s lives, and it is particularly poignant because both Wes Streeting and the Prime Minister proclaimed themselves, as recently as last June, just before the election, to be huge supporters of this charity and its objectives.