National Insurance Contributions: Healthcare

Commons Urgent Question

The following Answer to an Urgent Question was given in the House of Commons on Thursday 14 November.

“I am grateful to the honourable Member for asking this important Question. It gives me the opportunity to say to GPs, dentists, hospices and every part of the health and care system that will be affected by changes to employer national insurance contributions that this Government understand the pressures they face and take their representations seriously. The Chancellor took into account the impact of changes to national insurance when she allocated an extra £26 billion to the Department of Health and Social Care. There are well-established processes for agreeing funding allocations across the system, and we are going through those processes now with this issue in mind.

This Government inherited a £22 billion black hole in the public finances, broken public services and a stagnant economy. Upon taking office we were told that the deficit the previous Government recklessly ran up in my department alone would mean delivering 20,000 fewer appointments a week instead of the 40,000 more we promised. The Chancellor and my right honourable friend the Secretary of State were not prepared to see further decline in our NHS. That is why we put in an extra £1.8 billion to stop the NHS going into reverse this year.

We built on that at the Budget, delivering the significant investment that the NHS needs to get back on its feet, backing staff with investment in modern technology, new scanners and new surgical hubs, and rebuilding our crumbling primary and secondary care estate. Alongside that, we delivered a real-terms increase in core local government spending power of around 3.2%, which will help to address the range of pressures facing the adult social care sector, including £600 million in new grant funding for social care. We are now working through exactly how that money will be allocated, as per normal processes. As the Secretary of State set out yesterday, we will ensure that every pound is invested wisely to deliver the Government’s priorities and provide value to taxpayers.

The department will set out further details on the allocation of funding in due course, including through NHS planning guidance and the usual consultations, including on the general practice contract. As part of these processes, we will consider the impact of changes announced to employer national insurance contributions in a fair and open way over the next five months, before the changes come into force in April 2025”.

15:35:00

My Lords, unintended consequences have plagued policymakers and Governments for many years. I am interested in whether the impact on primary care providers, hospices and care homes was a deliberate or unintended consequence of the recent rise in employers’ national insurance. Did the Government conduct an impact analysis of the cost to primary care providers, hospices and care homes before the Budget? If not, have they conducted one since or do they intend to do so? Can the Minister assure non-state providers of primary care, hospices and care homes that this was not a deliberate measure to squeeze them out of the health and care space and that the Government will consider appropriate measures to ensure that they can continue to be financially viable and invest in facilities, staff and front-line services?

I assure the noble Lord that there is no intent to squeeze out any providers, which are much valued and appreciated. We will continue to listen to their concerns and consult them as we make allocations, which is, as he knows, the usual practice for every Government. On the Budget settlement for the Department for Health and Social Care for 2025-26, I assure him that the Chancellor considered the impact of all the changes in the Budget.

My Lords, the net cost to the already struggling community pharmacy sector from the national insurance changes is roughly £50 million. One community pharmacist told me last week that this means that they either reduce services to patients by closing for the equivalent of one day a week or make one and a half members of staff redundant. What advice would the Minister give to that community pharmacist and many others in her situation?

What I would say to each sector, including pharmacists, about the services they provide and what is expected in return from any contract is that, as in previous years—I emphasise that it is business as usual in this respect—employer national insurance contributions are dealt with as part of the process. We are very appreciative of the pharmacy sector’s contribution, not least because it will assist with one of the three pillars in moving from hospital to community services. I encourage all pharmacists to work with us to achieve what I believe they and we in government want: a service that is fit for the future.

Can the noble Baroness help us understand the huge impact this is having on the hospice movement, which is an extraordinary sector? We get an incredible service from it but, ironically, while we are having a national debate on assisted dying—some of us prefer to call it assisted suicide—this will make it even more difficult to provide this much-valued service. Is there not a case to be made for special support for those independent hospices which have to raise massive amounts of money from charitable sources, so that we are not penalising them?

As the right reverend Prelate is very aware, most hospices are indeed charitable. They are independent organisations that receive some statutory funding for providing NHS services. As we discussed in a recent debate in your Lordships’ House, the amount of funding that charitable hospices receive varies by integrated care board area, and that will depend in part on population need and the breadth and range of palliative care and end-of-life care provision within the ICB footprint. With NHS funding being provided on a tariff basis, as is usual every year, there is NHS planning guidance, a local government finance settlement and consultations with independent providers. That will happen this year as it has every single year under every previous Government.

My Lords, the Minister is aware of my interest with the Dispensing Doctors’ Association. The idea that allocations will be made in due course simply will not wash. GP practices, care homes and pharmacies will close their doors if the Government do not act urgently.

Under previous Governments, including her own, this was exactly what happened, and it will continue to happen. There are established processes on NHS guidance and the national tariff system, and there will be consultations on primary care contracts, which will play out in the normal—and what I regard as a fair and open—way. I make that point in respect of all Governments, not just this one.

My Lords, the root of this problem is that, in an election that the Labour Party was bound to win, it made a promise that it would not raise income tax, national insurance or corporation tax. The taxes it promised not to raise provide 70% of the Government’s income and are the basic toolbox of any Chancellor in any Budget. They sometimes go up or down according to the economic needs of the nation, and they are the broadest-based and fairest taxes. Now that the Government have imposed these rather damaging taxes to raise revenue in this last Budget and have gone for the choices they have, can I have the Minister’s assurance that this promise is not good for the next five years? It will confine the Government’s ability to raise revenue when they need to, so they will go into more areas and will do unintended damage to employment or particular sectors of the economy.

I appreciate hearing the view of the noble Lord, with his considerable experience, but this is a place where I know the current Chancellor would beg to differ. I gently point out that I believe the root cause is something rather different: this Government inherited a £22 billion black hole.

Oh!

Noble Lords may wish to groan and comment, but it is a fact. The deficit that the previous Government ran up in my department alone would mean 20,000 fewer appointments per week. That compares very unfavourably with the 40,000 more appointments that this Government are promising.

Does my noble friend agree that we are all getting a bit fed up with the groans from those on the other side when we take the time to remind them of the appalling debt we inherited? It is a truth that has been independently verified that we inherited this £22 billion. They are unwilling to admit the truth. Does she also agree with the noble Baroness, Lady Taylor of Stevenage, that we are putting forward proposals that they, understandably, constantly attack, but that they will not put up alternative proposals for dealing with the debt we have inherited?

I certainly agree with the comments of my noble friend Lady Taylor, who set out the government response very clearly in the last Question. I also share the view of my noble friend Lord Foulkes that it is important to be honest; I believe we have taken that on board as a new Government. That is why, for example, we commissioned the independent review by the noble Lord, Lord Darzi, to find out the state of the NHS in order that we could move forward. What the noble Lord found did not make for pretty reading, and it is our job to put this mess into a rather better shape than it is now.

My Lords, what has been described as “groans” might, in another language, be described as holding a Government to account. The Government are in charge now and have to answer the charges as put. If the Minister is correct that the Treasury evaluated what the changes to employers’ national insurance contributions would be, the Government will have known that this was going to affect not just big nasty bosses but a wide range of employers—hospices, care homes and all sorts of charities. The hairdressing sector is being decimated as we speak. I just went and stood in the rain for two hours at the farmers’ demonstration, where tenant farmers pointed out that these national insurance changes will mean they will have to sack farm workers. This is having a wide decimating impact. If the Government are going to be honest, I hope they will talk to each and every one of the sectors and tell them that this is going to be resolved one way or another.

This Government are very committed and are indeed talking to all sectors, including in my own department. As to the point the noble Baroness rightly raises about holding Governments to account, I welcome that. It gives me and my noble friends an opportunity to set out the plans, responsibilities and concerns of this Government. We will take them seriously and continue to work to get consensus wherever we can.