On 19 March, Members of Parliament voted to overturn House of Lords amendments that sought to exempt adult social care providers from the upcoming increase in employer National Insurance Contributions (NICs). This decision is viewed by sector leaders as a significant setback for the already strained social care industry.

This comes as a huge disappointment particularly following a day of action and rallying led by Providers Unite, a grassroots coalition uniting community care and support providers across the UK. Over 3,150 passionate individuals including supported people, care providers, and advocates came together to demand a NICS solution and longer-term funding for care and support services across communities.

The Care Show team also made an appearance to show their dedication to supporting the sector they serve.

Adam Camel, Show Manager, said ‘It was a privilege to witness the care sector come together, and see providers from across the country unite and get the focus and attention from government and the general public that social care very much deserves.’

 

Despite 8 national broadcasts, 7 regionals broadcast, over 250,000 people engaging with the campaign across social media and even 20% of rally participants meeting directly with their MP on the day, the amendments were overturned.

Details of the NICs increase

• Rate hike: effective April 2025, employer NICs will rise from 13.8% to 15%.
• Threshold adjustment: the salary threshold at which employers begin paying NICs will decrease from £9,100 to £5,000 annually.

While public sector entities, such as local councils, will receive grants to offset these increased costs, the proposed Lords amendments aimed to extend similar relief to regulated care providers and charitable health organisations. The Commons' rejection of these amendments, by a vote of 307 to 182, underscores the government's intent to proceed without these specific exemptions.

Financial implications for social care providers

The Nuffield Trust estimates that England's 18,000 independent adult social care providers will collectively incur an additional £940 million in NICs expenses for the fiscal year 2025-26. Concurrently, a 6.7% increase in the National Living Wage (NLW) is set to take effect next month. The combined financial impact of these measures is projected to be £2.8 billion for 2025-26, with £2 billion attributed to services commissioned by local authorities.

In response, the government has announced an increase of up to £3.7 billion in funding for councils with social services responsibilities for 2025-26. This includes an £880 million boost to the social care grant, historically allocated with 60% directed toward adult services, and permits councils to raise council tax by up to 5%, with a 2% increment specifically earmarked for adult social care. However, this translates to approximately £1.2 billion in dedicated additional resources for adult social care, which falls short of covering the anticipated combined costs of NICs and NLW increases.

Sector leaders' reactions

The decision has elicited strong reactions from sector leaders. The Homecare Association and Care England have labelled it a "devastating blow" that jeopardises the viability of numerous care providers nationwide. Jane Townson, CEO of the Homecare Association, emphasised that the government's refusal to exempt care providers from the NICs hike, coupled with insufficient funding to local authorities, threatens the sustainability of regulated home care services across Britain. She cautioned that providers may be forced to choose between regulatory non-compliance and insolvency.

Liz Jones, Director of Policy at the National Care Forum, echoed these concerns, stating that the government's stance inflicts significant harm on already fragile and underfunded essential public services relied upon by millions.

Government's position

Treasury Minister James Murray defended the government's position, asserting that accepting the amendments would endanger the intended revenue from the NICs increase and further strain public finances. He highlighted the government's provision of a 6.8% cash increase in core local government spending power for 2025-26, which

includes £880 million in new grant funding for social care. This funding is intended to address various pressures facing the adult social care sector.

The sector now faces the challenge of navigating these financial pressures while striving to maintain the quality and accessibility of care services.

Find out more here: https://www.communitycare.co.uk/2025/03/19/mps-overturn-exemption-for-care-providers-from-national-insurance-contributions-rise/