Rejection of Lords amendments exempting sector from tax increase is ‘devastating blow’ that will force social care providers to close, warn leaders
by Mithran Samuel on March 19, 2025 in Adults, Social work leaders
Photo: syahrir/Adobe Stock
MPs have overturned an exemption for adult social care providers from the forthcoming increase in employer national insurance contributions (NICs), in what leaders have described as a “devastating blow” to the sector.
In a vote today, they rejected House of Lords amendments to the legislation introducing the NICs rise that would have exempted regulated care home and home care providers in England and Wales, along with charitable social care services and health bodies, from the rise.
From April 2025, the rate of employer NICs will rise from 13.8% to 15% and the employee salary threshold at which firms start paying the tax will drop from £9,100 to £5,000 a year.
Public sector organisations, such as councils, are receiving grants to cover the costs of the rise for them, and the Lords amendment was designed to provide similar protection for health and social care providers.
However, the House of Commons overturned peers’ main amendment to the National Insurance Contributions (Secondary Class 1 Contributions) Bill, by 307 votes to 182, today, courtesy of the Labour government’s huge majority in the elected chamber.
Cost of national insurance rise for adult social care
Think-tank the Nuffield Trust has calculated that the NICs rise will cost England’s 18,000 independent adult social care providers £940m in 2025-26.
The government has said that councils with social services responsibilities will be able to help commissioned providers meet these costs through an increase of up to £3.7bn in their funding in 2025-26. This includes an £880m increase in the social care grant, 60% of which has been spent on adults’ services historically, and licence for authorities to raise council tax by up to 5%, with up to 2% ring-fenced for adult social care.
However, this amounts to only £1.2bn in dedicated extra resource for adult social care and, in addition to the NICs rise, providers must also fund the implications for their workforce of a 6.7% increase in the national living wage (NLW) next month.
The Nuffield Trust has calculated that the two measures combined will cost providers £2.8bn in 2025-26, with £2bn relating to council-commissioned care – significantly more than the increase in dedicated resource for adult social services departments in 2025-26.
‘Devastating blow that seals fate of thousands of providers’
Provider leaders reacted angrily to today’s vote, with the Homecare Association and Care England describing it as “a devastating blow that seals the fate of thousands of care providers across our nation”.
The Homecare Association has calculated that its members face a 10% increase in their costs in 2025-26, chiefly due to the rises in employer NICs and the NLW.
Its chief executive, Jane Townson, said: “The government’s refusal to exempt care providers from the [employer NICs increases], while simultaneously failing to provide adequate funding to local authorities, threatens the existence of regulated home care services across Britain. The government is forcing home care providers to choose between breaching regulations or insolvency.”
For the National Care Forum, director of policy Liz Jones said: “In choosing to vote down the amendments that would have protected care and support providers from the devastating impact of the employer’s national insurance contribution changes, the government inflicts a devastating blow on already fragile, underfunded and undervalued essential public services which millions of people, and their families, depend on for vital support.”
‘Funding available to meet social care pressures’
Defending the government’s position in the House of Commons today, Treasury minister James Murray said it could not support the Lords amendments because they would put at risk the funding that ministers intended to raise through the employer NICs rise and put further pressure on the public finances.
“On social care, the government have provided a cash increase in core local government spending power of 6.8% in 2025-26, including £880m of new grant funding provided to social care—funding that can be used to address the range of pressures facing the adult social care sector.”
adult social care funding, Budget 2024, national insurance contributions