Reeves warned of ‘tsunami of care home closures' in wake of tax raid

Telegraph

12-04-2025

Rachel Reeves will trigger a 'tsunami of closures' across Britain's care home sector, a leading operator has warned, after her tax raid forced it to shut one of its sites.
Robert Kilgour, the founder of Renaissance Care, said he had been left with no choice but to close one of his 19 care homes in Scotland last week as a direct result of the Chancellor's Budget, which sparked an increase in running costs.
He attacked the Government over its 'profound lack of support and understanding of the care sector', as he warned that the closure is just the 'tip of the iceberg' across the UK's strained social care sector.
The closure comes after Mr Kilgour, who employs more than 1,400 workers and houses more than 700 residents across his Renaissance care homes business, repeatedly raised concerns about the impact of higher National Insurance contributions (NICs).
He said the policy change, which includes lowering the threshold at which NICs is paid from £9,100 to £5,000, would cost his business hundreds of thousands pounds extra a year.
The extra burden has since prompted the closure of the home, with Mr Kilgour claiming he had 'sleepless nights' over the decision.
'It is hugely disappointing that it has come to this because they have been warned,' he told The Telegraph.
'I did not think that the Labour Government would make the social care sector worse and it's completely shocking that they have done so. I fear a tsunami of closures in the second half of this year and in the first half of next year.
'That is going to lead to more beds being blocked and longer NHS waiting lists. And reducing waiting lists is the whole reason Ms Reeves has said she is raising taxes.
'They have really shot themselves in both feet by doing this.'
Mr Kilgour, who opened his first care home in 1989, also said it was particularly 'galling' that publicly funded care homes had been shielded from Ms Reeves's £25bn tax raid, unlike those in the private sector that are bearing the brunt of higher levies.
He highlighted a new survey which said 50pc Scottish care homes were actively considering closure.
Edward Argar MP, shadow health and social care secretary, said: 'Conservatives, and the care sector, warned the Labour Government again and again of the devastating impact their jobs tax would have on social care providers already under pressure.
'And we now see a hugely-respected figure in the sector setting out those real-world consequences very clearly.
'Labour's jobs tax, coupled with the changes to thresholds, has piled yet more pressure on providers, and they in many cases will be faced with no option but to close homes.'
The impact of the tax raid has led to a group of private care homes launching legal action against the Chancellor.
Care England, the industry body for private care homes, has announced a judicial review in the hope of securing a carve out from the tax rises.
Martin Green, the group's chief executive, told The Telegraph: 'This judicial review marks a critical moment for adult social care.
'The decision to increase National Insurance contributions without exempting the care sector is a political signal that social care remains an afterthought.'
The Government was contacted for comment.
The NHS and social care are two sides of the same coin
By Robert Kilgour
It's not rocket science, just a simple fact that you cannot fix the NHS crisis without first fixing the long-standing crisis in social care.
Social care desperately needs a 10-year funding and workforce plan, better integration with the NHS and enhanced use of technology, including AI.
Recent UK governments of all different colours have repeatedly failed to deliver on their promises to reform social care.
For too many years it has been 'NHS first and social care second'.
That makes no sense when you consider what would happen to the NHS if social care were to collapse.
Social care was already running on fumes by the time of the July 2024 general election, after many years of government neglect and lack of proper funding and the impacts of the pandemic and the energy crisis.
I did not expect the new Labour Government to make social care reform an urgent priority and I was not surprised when they kicked it into the long grass with yet another commission.
The Casey Commission, which will not issue its final report until 2028, is the third independent commission on social care reform in England to be created over the last three decades.
I was, however, shocked when they made things far worse with the employers' National Insurance changes in Rachel Reeves's October 'tax bombshell' Budget.
These changes have now come fully and painfully into place from April 6 this week.
The 8.7pc rate increase from 13.8pc to 15pc was bad enough but the reduction of the starting threshold from £9,100 to £5,000 was the real killer blow, particularly for the retail, hospitality and care sectors who employ a high percentage of part time staff.
This is a shocking betrayal by this Government of all the amazing front-line pandemic heroes and all the vulnerable individuals for whom they care.
I hoped for some small crumb of help in the recent Spring Statement but was again disappointed.
This time however, I wasn't surprised.
It is painfully clear that the Chancellor and this Government appear to have no grasp of how just critical things are at the front line of social care.
This was demonstrated by ENI tax relief being given to the public sector but not the independent sector despite them providing a public service.
Where is the fairness in that – more public sector good, private sector bad. It is good to hear that Care England is set to launch a judicial review of the Chancellor's actions in this regard.
Although Renaissance Care is a private company, we provide a public service with 70pc of our residents being local authority funded. We provide a good quality of care at half the cost of Local Authority run care homes to the taxpayer.
We have also seen Local Authority fee increases for this coming year vary between zero and 6pc, the majority somewhere in the middle. That is totally inadequate for the sector to be able to cope with all the Budget increases and changes.
As night follows day, care homes will close as a direct result of the October Budget. That will lead to more NHS blocked beds, more cancelled NHS operations and longer NHS waiting lists; a huge own goal by this Government.
It was therefore, with a heavy heart and much sadness, that Renaissance Care announced on Tuesday the very difficult decision to close one of our 19 care homes as a direct result of the financial impact of Budget measures and the profound lack of support and understanding of the care sector by the Government.
Disturbingly, our closure may be the tip of the iceberg in light of a recent Scottish Care survey showing that 50pc of Scottish care homes were actively considering closure.
It is clear that we urgently need to have a level playing field of care provision and cost of care between the independent and voluntary sector and the public sector – taxpayers deserve nothing less.