Budget: Reeves faces backlash from health and care services over NI hikes

GPs and hospices say failure to include them in "public sector compensation" arrangements will have dire consequences
Photo: Loop Images Ltd/Alamy

By Jim Dunton

01 Nov 2024

Chancellor Rachel Reeves is facing claims that the government's plans to increase employers' National Insurance contributions as part of the Budget's tax-raising measures will be hugely damaging for parts of the health and care sector.

Changes to NI contributions that employers must make account for more than half of the £40bn package of tax increases that Reeves set out on Wednesday.

Government departments, National Health Service organisations and other parts of the public sector will receive compensation in the form of higher resource budgets to cover the increased cost.

According to the Office for Budget Responsibility, compensation to public sector employers and adult social care providers is projected to be £5.5bn in 2025-2026, rising to £5.9bn in 2028-29.

But a question mark remains over the status of GP surgeries and hospices – as well as some social-care providers.

Although most people would consider GPs to be part of the NHS, local surgeries are usually independent businesses that are contracted to provide services for the NHS – a situation that dates back to the foundation of the health service in 1948.

Hospices, meanwhile, are usually charities – although they often work in partnership with the NHS, paid for through a combination of NHS contributions and donations.

David Wrigley, who is deputy chair of the British Medical Association's GP council, said the impact of the NI changes on doctors' surgeries across the country would be "monumental".

"Many are already on a financial tight rope due to years of neglect," he wrote on X. "We need a rapid announcement of full reimbursement."

Toby Porter, chair of Hospice UK, which represents 200 hospices around the country, said there was a funding crisis in the sector and a failure to exempt it from the NI changes would make things worse.

"The number of people dying each year in the UK is going up significantly, and right now, hospices are making service reductions and redundancies," he said.  "Without an exemption to the rise in employer National Insurance contributions, hospices will face even further financial burden."

While some social care services are provided by the NHS and local councils, much is also delivered by private companies who are unlikely to meet the criteria for public sector compensation.

Lobby group the Local Government Association noted that the Budget included an extra £600m funding package for social care. But it said that with no additional funding for new NI costs and increases in the National Living Wage, private care providers would expect councils to pay more for services to reflect the new burdens.

The LGA said: "This will almost certainly absorb all of the grant increase for many councils even if it is spent wholly on adult social care, leaving little or nothing to address immediate challenges in adult social care, such as long waiting times for an assessment of a person’s care needs or the commencement of care packages."

It said the government needed to "give clarity" on whether councils would be protected from extra cost pressures from the NI changes for directly employed and contracted-out services.

Yesterday, health secretary Wes Streeting told BBC Radio 4's World at One programme that he was "working through" the extent to which social care providers would be protected from the NI changes and would have more to say "in the coming weeks".

Later in the day, chief secretary to the Treasury Darren Jones told BBC One's Question Time programme that GPs would not be exempted from the new NI regime for employers.

"GP surgeries are privately-owned partnerships, they’re not part of the public sector," he said. "They will therefore have to pay."

Jones noted, however, that the extent to which GPs were affected by the NI changes would depend on their size, as the system had been designed "so that it protects the smallest businesses".

Civil Service World sought a response from the Department of Health and Social Care. It had not provided one at the time of publication.

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