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In a recent pivotal vote, MPs decisively rejected amendments that would have exempt social care providers from the forthcoming increase in employer National Insurance Contributions (NICs). This decision marks a significant setback for the sector, which is already grappling with financial instability and operational challenges.
From April 2025, the employer NIC rate will rise from 13.8% to 15%, coupled with a reduction in the salary threshold at which contributions commence, from £9,100 to £5,000. For the approximately 18,000 independent adult social care providers in England, this change is projected to incur an additional £940 million in costs during the 2025–26 fiscal year.
The Homecare Association warns that these increased expenses, combined with a 6.7% rise in the national living wage, could lead to a 10% surge in operational costs for providers. However, many local authorities have offered fee increases averaging only 5%, with some offering no increase at all, exacerbating the financial strain.
The financial pressures caused by the NIC hike are pushing many providers to the brink of insolvency. The National Care Forum and the Homecare Association have expressed grave concerns that without adequate funding, numerous providers may be forced to close or reduce services, jeopardising care for vulnerable individuals.
Charitable organisations, in particular, are facing existential threats. There have been recent cases where some have resorted to evicting residents or ceasing to accept new ones to maintain financial viability.
The government’s decision to reject the exemption has sparked widespread criticism from opposition MPs along with a petition urging the government to reconsider the decision has garnered over 40,000 signatures.
Dr Jane Townson OBE, CEO of the Homecare Association, commented:
“The government speaks of ‘home first’ policies and improving care workers’ conditions, but their actions today reveal a fundamental disconnect between rhetoric and reality. Without immediate intervention through the Local Government Finance settlement, we risk widespread service disruption, with devastating consequences for older and disabled people who rely on these essential services.”
Read Jane’s full statement.
Despite these appeals, the government has defended its decision by arguing that the NIC increase is necessary to bolster public finances and that the additional funding for local authorities should alleviate the burden on providers.
The rejection of the NIC exemption is a major concern for the social care sector, which is already contending with staffing shortages, rising operational costs, and inadequate funding. Without immediate intervention, the sector faces the prospect of widespread closures and reduced services, leaving vulnerable individuals without essential care.
Industry leaders are calling for urgent government action to provide adequate funding and support to ensure the sustainability of social care services. Failure to address these issues could lead to a crisis in care provision, with long-term consequences for both providers and the individuals they serve.
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