IMPACT OF UK BUDGET NATIONAL INSURANCE ANNOUNCEMENTS ON SOCIAL CARE EMPLOYERS IN SCOTLAND

The 2024 UK Autumn Budget announced on 30 October by Chancellor Rachel Reeves includes a 1.2% increase in employer National Insurance contributions, bringing the rate to 15%. The threshold at which employers start paying National Insurance will also be reduced from £9,100 to £5,000 per employee. This is likely to increase costs for all businesses, but especially social care providers whose staffing costs are usually between 80-90% of overall costs. The National Insurance change applies to all employers in Scotland.

A survey conducted by Scottish Care between 5-14 November 2024 of its members found that:

• The average wage cost increase as a result of the changes across respondents was 4.67%.
• The average increase to employer NI contributions was 39.54%.
• Respondents noted a cost of between £19,800 and £15,500,000 per social care employer as a result of the National Insurance changes, dependent on the size of organisation and number of employees.
• 97.83% of respondents said these changes make their organisation less sustainable.
• Of those who responded, nearly half (48%) note the very real possibility of service closure as a result of this increase.

Quotes from survey respondents:

“If our home was full but with only Local Authority residents, we would quickly go out of business.” (very small care home employer)

“We will be forced to take on more privately funded care and potentially reduce our service to the council.” (small care at home employer)

“If this increase in costs are not funded not only will homes have to close the facilities will be unsaleable as they are specialised. The organisations will suffer a massive loss on their asset. Employees will be forced to leave the sector.” (very small care home employer)

“The company (and all services) will face immediate closure as soon as NIC and NMW take place without significant additional support.” (small care at home employer)

“I am considering closing my business across 5 councils” (small care at home employer)”

Scottish Care’s analysis

The failure to recognise and account for the impacts of these changes on social care organisations raises further concerns about the lack of value placed on social care and awareness of the perilous sustainability of the sector.

The changes to National Insurance rates and thresholds announced in the UK Budget will create additional financial burdens on independent care providers and further strain already tight operating margins.

Alongside the changes in the National Minimum Wage, these increases are going to have a huge impact on the ability of social care services to remain sustainable and to survive.
NHS services are to be exempt but care homes, hospices and GPs are going to fall foul of this increase, which is wholly inequitable.

The affordability of National Insurance increases in the social care sector must be recognised and the sector exempted, or significant increased funding ringfenced to support its implementation.

The Scottish Government will announce its own Budget setting out its tax and spend plans on 4 December 2024. It must address these impacts in its plans in order to support social care employers, employees and those who rely on support.

Dr Donald Macaskill, CEO of Scottish Care, said:

“These additional pressures on social care providers created by the UK Budget announcement are unworkable in the current climate and a solution, either through exemption or funding, must be found in order for the social care sector to be sustained. Scottish Care is incredibly alarmed at the figures presented in our survey, not least around service closures, with many providers indicating that this may very well be the straw that breaks the camel’s back. It is no exaggeration to say we will lose swathes of social care provision in Scotland unless urgent, practical and resource-based solutions are progressed for the sector. If not, the impact on individuals, communities and public services will be catastrophic.”

The survey and its findings will be discussed further at Scottish Care’s National Care Home Conference tomorrow (Fri 15 November) in Glasgow, which will bring together care home providers, staff and stakeholder from across Scotland. The Conference will also be attended by the Cabinet Secretary for Health and Social Care as well as health & social care spokespeople from opposition parties, where the topic of National Insurance impacts will be addressed as part of a ‘Fireside Chat’ session. Dr Donald Macaskill and deputy CEO Karen Hedge will also give an address, sharing the survey findings and outlining the critical issues facing the care home sector.

Scottish Care has released a summary of the 2024 Autumn Budget and its implications for social care providers. Announced on 30 October, the budget brings changes that could impact costs and funding for Scotland’s social care sector.

Scottish Care calls on the Scottish Government to prioritise social care funding and partner with the sector to address these budget impacts, ensuring sustainability for employers, staff, and individuals who access care and support.

Read the Briefing Paper here 

Scottish Care has published a briefing to guide members and stakeholders on the potential effects of the UK Employment Rights Bill on Scotland’s social care sector. Introduced on 10 October, the Bill aims to strengthen employee rights across the UK, but Scotland’s care sector may face unique challenges, especially in balancing flexible, person-centred care with new worker protections.

The briefing covers impacts on zero-hours contracts, fair pay, and sectoral bargaining, which could benefit workers but bring financial and operational challenges.

Members are encouraged to review the briefing to stay informed and support the ongoing consultation process.

Read the Briefing Paper here