MPs overturn House of Lords exemption for social care in National Insurance hike

The House of Commons has overturned a House of Lords amendment that sought to exempt social care providers from the upcoming increase in employer National Insurance Contributions (NICs), a move that has sparked widespread concern within the sector. 

National Insurance hike and its impact 

As part of Chancellor Rachel Reeves’ budget last Autumn, employer NICs will rise from 13.8% to 15% starting in April 2025. The Government aims to raise £25 billion to fund public services, but the increase has been met with criticism, particularly from the social care sector and care providers, who warn of severe financial strain. 

The social care sector is already facing significant financial pressure, with many providers struggling to cope with rising costs. In addition to the NIC hike, the sector must also absorb a 6.7% increase in the National Living Wage. Care providers warn that these additional costs could lead to closures, reduced services, and worsening NHS bed-blocking issues. It has been estimated that the NIC rise alone will cost social care providers £940m in 2025-26. 

House of Lords exemption and Commons rejection 

In an effort to shield the social care sector, the House of Lords passed an amendment that would have exempted health and social care providers from the NIC increase.  

However, MPs in the House of Commons voted to overturn the Lords’ decision, insisting that the exemption would create a dangerous precedent and undermine the Government’s revenue-raising efforts. Ministers argued that while social care is crucial, making exceptions to tax increases could lead to further demands from other sectors, weakening the overall impact of the policy. 

Reaction from the social care sector 

Care sector leaders have described the decision as a “devastating blow”, warning that it could push many providers to the brink of collapse. The National Care Association criticized MPs for ignoring the financial realities of the sector, stating that the increased tax burden will lead to job losses and service reductions. 

Industry experts also fear that the rejection of the exemption could exacerbate existing staffing shortages in care homes, as providers struggle to compete with other industries on wages. Some smaller care providers have already signalled that they may be forced to close due to unsustainable cost increases. 

Political fallout and next steps 

The decision to overturn the exemption has sparked debate within Parliament, with opposition MPs accusing the Government of failing to protect essential services. Some Conservative MPs have also voiced concerns, warning that the NIC hike may not deliver the intended benefits for public services if it results in widespread business closures. 

Despite the backlash, the Government remains committed to implementing the increase as planned. However, pressure is mounting for additional financial support for the social care sector to mitigate the impact of rising costs. 

As the April 2025 deadline approaches, care providers and industry representatives continue to urge the government to reconsider its stance or introduce alternative measures to prevent a crisis in the sector. 

The Birketts view 

The overruling of the exemption for the social care sector is likely to be seen by many operators as catastrophic and in complete contrast to the Government’s pledge to social care reform. With already very narrow margins in some situations, let’s hope the additional funding also promised will make its way to operators to offset the NIC rises and maintain the levels of care and beds which are all dearly needed.