The House of Lords voted for pharmacies to be exempt from a hike in National Insurance contributions (NICs) after amendments to its bill were agreed during a debate yesterday (February 25).
Lords voted with a 130 majority, as 305 agreed to changes of amendment 1 of the National Insurance Contributions (Secondary Class 1 Contributions) Bill against 175 votes, with Labour members accounting for over 90% of those voting against the amendment.
The new government’s first budget in October saw Chancellor Rachel Reeves announce that employer National Insurance contributions would rise in April 2025 by “1.2 percentage points” to 15%, while the threshold at which employers start paying this will reduce from £9,100 per year to £5,000.
Read more: Minimum wage to rise 6.7% as National Insurance hike confirmed
Laying out her opposition to this part of the bill, the Liberal Democrats’ Baroness Barker stressed exemptions the government proposed for the public sector did “not apply across the board” to pharmacies as well as dentists, care and hospice providers.
“We have been forced to take these measures,” Barker said.
Conservative Lord Ahmad of Wimbledon highlighted the struggle community pharmacy faced from the proposed National Insurance hike as “they will have to shut” because “they cannot afford to keep their employees”.
Sector support for amendment
The bill is currently in its third reading in the House of Lords before going back to the House of Commons.
National Pharmacy Association chair Nick Kaye urged the government “to accept this important amendment, which would help pharmacies manage a looming bill of hundreds of millions of pounds”.
“We’ve been clear that without additional support, we would recommend pharmacies to cut back services, including their opening hours, in order to protect their future of their businesses,” he said.
The Independent Pharmacies Association chief executive Dr Leyla Hannbeck said the proposed increase will have “a significant impact on the finances of community pharmacies, many of whom are struggling to get by or at risk of closure”.
“We welcome this vote in the Lords, and now call on MPs to follow suit and exempt pharmacies from this increase,” she added.
The Company Chemists’ Association chief executive Malcolm Harrison said: “We are pleased to see the resounding support for this amendment in the Lords yesterday. It is absolutely right that pharmacies should be exempted from the increase to National Insurance contributions.
“Pharmacy businesses earn as much as 90-95% of their income by delivering NHS care and services. The amount that the government pays pharmacies to deliver for the NHS has not increased since 2014.
“As increased operating costs cannot be passed on to the NHS or to patients, pharmacy businesses have been forced to simply absorb them. We urge Peers to pass this amendment and hope that MPs will also follow suit.”
Analysis
A spokeswoman for Community Pharmacy England said: “As we said at the time of the Autumn Budget, the impact of changes to NI contributions on the community pharmacy sector must be mitigated.
“Community Pharmacy England analysis at the time estimated this increase would cost pharmacies £50 million, whilst the increases in the National Living Wage could cost anywhere between £115-152 million.
“We have been raising awareness of this issue for many months, including arguing strongly that any dispensations for health bodies must include community pharmacy. It is reassuring to see that Peers have recognised the sector’s plight.”
Six month review
During the debate, Conservative Baroness McIntosh stressed that pharmacies are in an “acutely difficult position caused by the Government’s announcements” on National Insurance already as they are “currently not being fully reimbursed for the costs of medicines that they are dispensing”.
And the Liberal Democrat Baroness Kramer said she is “not going to sit here while pharmacies basically cut their hours and services”.
“People are being told now that their jobs are at risk. This is not a hypothetical or some exaggerated claim.
Read more: Government needs a ‘reality check’ on services and pharmacy funding, warns minister
“This is a process that is under way across the community healthcare and social care sectors to absolutely cut back in response to this increase in employers’ National Insurance contributions. We are trying to stop a disaster,” she said.
Also in the debate, amendment 38 was discussed and had a new clause added which was agreed by 182 votes to 144 against.
The change means “a review of the impact of the measures in this Act on certain sectors within six months of the day on which it is passed” will be conducted, and this includes pharmacies.
Read more: IPA warns ‘wrecking ball’ budget will cost sector over £125m
It comes after Northern Ireland’s health minister Mike Nesbitt told members of the legislative assembly (MLAs) it needs a “reality check” on funding pharmacy earlier this month, and that increased National Insurance contributions for pharmacists as well as pay and price inflation will increase costs for the sector.
And in November, the IPA revealed analysis of the government budget’s potential impact on the community pharmacy sector, concluding the “overall cost” of the rise in employer NICs and national minimum wage would equate to £12,002 for an average pharmacy per year – totalling more than £125 million for the sector as a whole.