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.