Chancellor Rachel Reeves has been warned that her planned hike in employers’ National Insurance contributions could have a “devastating” impact on the care home sector, potentially forcing providers to close or make severe cutbacks. The tax increase, which has been described as a “tax on jobs,” is expected to push up the cost of care and exacerbate the ongoing crisis in the sector.
Shadow Chancellor Mel Stride has raised concerns that the tax hike will lead to “higher unemployment” and make care less affordable, as employers pass on the additional costs to consumers. He warned that families seeking care for loved ones could face “diminishing supply” and “increased costs,” further straining an already struggling system.
The National Care Association has estimated that “about a quarter of care services” could be at risk of closure due to the tax increase, while the Nuffield Trust warned that the adult social care sector could face additional costs of over £900 million.
Mike Padgham, executive chair of Saint Cecilia’s Care Group, called the situation “madness,” stating that many care providers may not survive the financial strain. He highlighted that the tax hike would force care homes to cancel planned pay rises for staff and delay refurbishment projects, further impacting the quality of care.
Nadra Ahmed, executive co-chairman of the National Care Association, warned that the tax increase would critically impact recruitment, which is already a “huge cause for concern” in the sector. She emphasized that people who rely on care services face an “uncertain future” as a result of the policy.
The warnings come ahead of Reeves’ Spring Statement, where she is expected to outline the government’s financial plans. Stride criticized Reeves, stating that the country’s economic problems are “of the Chancellor’s making” and that her tax decisions are contributing to inflation and higher interest rates.
Stride also expressed concerns about the government’s approach to welfare reforms, describing it as “scrabbling around with much haste and not much thought.” He argued that fundamental, principled reforms could achieve larger savings and be fairer to those affected.
What do you think about the proposed tax hike and its potential impact on the care home sector? Should the government reconsider its approach to avoid further strain on care providers? Let us know in the comments.
