National Insurance rise ‘will see some care homes go under’

Extra costs may bankrupt them, says industry group which also complains Labour has broken promise to prioritise sector

Labour’s National Insurance raid will bankrupt some care homes, a leading figure in the industry has warned.
Nadra Ahmed, chairman of the National Care Association, told The Telegraph some providers were facing £250,000 of extra annual costs because of the tax change.
She accused Labour of backtracking on a promise before the general election to prioritise the social care sector if it won.
Rachel Reeves, the Chancellor, has decided to protect the NHS from her employers’ National Insurance rise in the Budget, but has not done the same for providers outside the public sector.
It means that GPs, private social care groups and charities that employ nurses and doctors all face a spike in costs when the tax rise kicks in next April.
That has triggered a backlash, with political opponents calling for those groups to also be exempt and accusing Labour of favouring the state over the private sector.
Ms Ahmed, whose association represents around 1,200 small- to medium-sized care providers, called for the sector to be spared the National Insurance rise.
She told The Telegraph: “We should be in exactly the same position as the NHS and be exempt.
“We are looking after vulnerable people just as the NHS are. They are both sides of the same coin.
“Social care is being disproportionately affected by this rise.”
She added: “I think social care providers will be looking very carefully at their bottom line.
“I fear some could go under. They will be thinking, ‘Are we able to meet our responsibilities?’
“If the employment costs are going up as much as they are and there is no investment coming into social care, it is not rocket science that some providers will exit the market.
“And it will be the smaller providers that don’t have the resilience to just keep absorbing additional costs that are most at risk.
“There is a supposed commitment from Labour to fix social care but we have seen no action. In fact, the action of increasing National Insurance and not excluding social care goes against that commitment.”
Ms Reeves put an increase in employers’ NICs at the heart of her tax-raising Budget.
It was estimated to raise the Treasury £25 billion a year – the bulk of a Budget that included £40 billion of tax rises overall.
Currently, employers pay a 13.8pc rate of National Insurance on employees’ earnings above a threshold of £9,100 a year.
Ms Reeves has decided to raise the rate to 15pc from April 2025 and drop the salary threshold at which it kicks into £5,000 a year.
The NHS is effectively being exempted from paying the increased National Insurance for doctors and nurses, with billions of pounds given to it to compensate for the change.
However, the support is not being extended to private sector providers offering similar services.
The social care sector is already under pressure, with the industry estimating that more than 400,000 additional workers must be found by 2030 to deal with spiralling demand from an ageing population.
Ms Ahmed said of the Treasury’s NICs rise approach: “This will absolutely make the social care crisis worse.
“It just exacerbates an already critical situation in a sector that is important to millions of people on a day-to-day basis for their care and support.”
The Prime Minister’s official deputy spokesman defended the decision for GPs and social care providers to pay the higher level of National Insurance.
The spokesman said: “On this and more broadly, the Government has taken tough decisions driven by the need to restore economic stability and protect public services and that’s the approach that we have taken and we’ve been very clear throughout that that involves tough decisions and trade-offs.”