Care homes and GPs could face closure under Labour tax plans, health leaders warn

1 November 2024, 22:08

GP practices and care homes could be forced to close under Labour’s new tax plans, health leaders claim.

Health leaders have warned Labour’s plans to raise £25 billion by taxing employers could “fatally undermine” their mission to fix the NHS, with elderly Brits to “bear the brunt” of the cost.

The NHS is exempt from the tax rises unveiled in Rachel Reeves’ autumn budget, but care homes, GPs and pharmacies are run as private businesses and so will have to pay the 1.2 per cent increase in employer National Insurance.

This could lead to a £40,000 increase in costs for the average GP, a new report from the Times claims.

Professor Kamila Hawthorne, chairwoman of the Royal College of GPs, told the publication: “For some, this extra financial burden will be the straw that breaks the camel’s back, forcing them to make tough decisions on redundancies or even closing their practice, and ultimately it is our patients who will bear the brunt.”

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While the British Medical Association claimed some GPs “simply will not be able to afford these increases, and will have to reduce their staff and services, or even close their doors entirely.”

Despite Labour’s massive £22.6 billion investment into the NHS in Wednesday’s budget, some have said these tax rises could undermine efforts to bring it back from the brink of collapse.

Detractors claim that if private social care facilities are forced to close, the NHS will be forced to pick up the pieces.

Caroline Abrahams, charity director at Age UK, said: “Efforts to strengthen our health services will be fatally undermined for as long as social care can only limp along.

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“Without good community-based care, older patients get stuck in hospital and patient flow grinds to a halt. I fear we’ll see the consequences all too clearly this winter, as ambulance times lengthen, and A&E departments struggle to cope. It is older and disabled people who depend on good care to live decent, full lives, who bear the brunt.”

This comes as Chancellor Rachel Reeves seeks to calm the markets and provide reassurance of the UK's stability after her Budget borrowing spree sparked jitters.

The Budget increased state spending by almost £70 billion per year - a little over 2% of gross domestic product (GDP) - funded by increased taxes and borrowing.

The scale of extra borrowing - around £32 billion a year on average - saw yields on government bonds increase as the market responded to the Chancellor's plans.

Ms Reeves has played down the impact, saying that "markets will move on any given day" and sought to offer reassurance of her commitment to "economic and fiscal stability".

Paul Johnson, director of the Institute for Fiscal Studies (IFS), had warned that the "implausibly low spending increases" in the Budget meant there was a risk taxes would have to rise again if the economic growth Labour is depending on does not materialise.

But the Chancellor told Channel 4 she would "absolutely not" come back and raise taxes once again.

She said: "We have now set the envelope of spending for this Parliament, and we're going to live within our means."

Asked if she was worried about the market response, Ms Reeves said: "Markets will move on any given day, but we have now put our public finances on a firm footing with robust fiscal rules."

The International Monetary Fund (IMF) endorsed the investment and spending on public services in the Chancellor's Budget, as well as sustainable tax rises.

In an unusual move, the Washington-based watchdog said: "We support the envisaged reduction in the deficit over the medium term, including by sustainably raising revenue."

But the verdict of the IMF appeared not to reassure financial markets.

The yield - or interest rate - on a 10-year gilt, an indicator for the cost of state borrowing, hit 4.568% on Thursday afternoon, the highest point since August 2023, while the pound also weakened against the dollar.

Ms Reeves was asked if she was worried that the country could be heading for a "Liz Truss situation".

"The number one commitment of this Government is economic and fiscal stability which is why we put in place yesterday in the Budget robust fiscal rules that we will meet two years early," she told Bloomberg TV.

"We have more headroom than the previous government left us, and that is important," the Chancellor said, insisting that the public finances are "on a stable and a solid trajectory".