A Budget seemingly designed to punish GPs

Rachel Reeves unveiled her first Budget as chancellor, with a focus on ‘rebuilding the NHS and public services’ – but GP practices seem to have fallen through the cracks. Anna Colivicchi and Eliza Parr explain what it all means for GP practice finances

Labour’s first Budget in 14 years had been trailed as a ‘once in a generation’ Budget in the weeks leading up to it. But many have been disappointed by the changes revealed by the chancellor on Wednesday.

The increase to employer National Insurance Contributions (NICs) in particular – and whether GPs will receive any extra funding like other parts of the NHS to offset these additional costs – has caused quite a lot of concern and confusion among the profession, especially following (seemingly inaccurate) comments made by the chief secretary to the Treasury Darren Jones.

And despite the chancellor announcing a £22.6 billion increase in ‘day-to-day spending’ for the NHS and a £3.1 billion ‘capital boost’ for the Department for Health and Social Care, GPs are likely to be one of the parts of the NHS worse off as a result of the Budget.

Practices in uniquely awful position around NI hike

The hike in NI contributions will affect pretty much every business and organisation. If you missed it, the chancellor announced that the rate of employer National Insurance will increase by 1.2 percentage points – to 15% – from 6 April next year. It has also reduced the ‘secondary threshold’ – the level at which employers become liable to pay national insurance on each employee’s salary – from £9,100 per year to £5,000 per year. It is estimated that that businesses will now have to pay an extra £865.80 in NI each year for each employee earning £30,000.On their own, these two measures will affect GP practices particularly.

The BMA has pointed out that the majority of clinical staff working in general practice earn more than £30,000, meaning the additional costs could run into the tens of thousands for some surgeries.

The lowering in the secondary threshold will also see more part-time surgery staff eligible for NI employer contributions. But this is by no means the end of the problems for GP practices. Because they are in a uniquely awful position. On the one hand, they don’t seem to be benefiting from the Treasury’s promise to set aside funding to protect the spending power of the public sector (including the NHS) from the ‘direct’ impacts of the employer NICs changes, because they are not true public bodies. 

Yet, they also miss out on the Government’s sole positive announcement – the doubling of the ’employment allowance’, which reimburses £10,000 in NI contributions (up from £5,000) to small businesses who paid less than £100,000 in NI class one liabilities the previous tax year – a threshold that is also being scrapped next year, so that any size business can claim employment allowance. This definition would therefore include the vast majority of GP practices – but the allowance doesn’t apply to them, because in this case they are counted as public bodies, who are excluded from the allowance. 

Confused? You’re not the only one. Because chief Secretary to the Treasury Darren Jones doesn’t seem to understand this anomaly. Speaking to the media, he erroneously claimed that, depending on their size, practices could apply for employment allowance.

GPC England chair Dr Katie Bramall-Stainer wrote directly to Mr Jones this afternoon to set the record straight. She said that, while it is true that the Government has increased the employment allowance for small businesses to offset some of the impact of a NICs increase, this does not apply to those providing public services, with GPs specifically excluded on this basis. ‘This means that even the smallest practice will not be eligible to access this support and will have to cover the total cost of increases out of their own pocket,’ she added.

The BMA is, of course, pushing for GP practices to be reimbursed. Dr Bramall-Stainer called on the Government to provide ‘absolute certainty’ that GPs will be exempt from this increase and ‘reimbursed in full’. Without this, she said practices will be ‘forced’ to reduce services, implement cost cutting, shed staff, and in some cases ‘close their doors completely’.

Meanwhile, the RCGP wrote to health secretary Wes Streeting also asking for ‘urgent assurances’ that GP practices will be given ‘the same protection’ as the rest of the NHS and public sector. College chair Professor Kamila Hawthorne echoed the BMA’s concerns and said that for some practices this will be ‘the straw that breaks the camel’s back’ and it will inevitably lead to more surgeries shutting their doors.

The Lib Dems have also joined these calls, saying that this new government ‘must not make the same mistakes as the Conservatives’ and that fixing the GP crisis is ‘crucial for saving the NHS’.

Yesterday health ministers were ‘locked in discussions’ with Treasury over this issue, but so far we still don’t know whether GP practices will be allocated extra funding to offset the costs, despite speculation and extensive media coverage of the issue.

Day-to-day health spending

In her speech on Wednesday, the chancellor suggested that ‘difficult decisions’ on tax – such as the hike to NICs – have made it possible to inject more money into the NHS. The headline figure was an extra £22.6bn for the NHS in the next financial year, which Ms Reeves said is the ‘largest real-terms growth in day-to-day NHS spending outside of Covid since 2010’. 

It’s important to note that this additional money is spread over two years, with the Department of Health and Social Care’s ‘resource’ budget rising from £177.9bn in 2023/24 to £200.5bn in 2025/26. The bulk of this money is directed towards NHS England, which will see a 4% real-terms increase to its allocation over the same two-year period. 

While the Government has not set out line-by-line details of how these extra billions will be spent, it’s clear the focus is on secondary care. DHSC’s extra spending power will support one of Labour’s manifesto promises to deliver ‘an additional 40,000 elective appointments a week’ in England. This will help the NHS to ‘make progress’ on meeting the 18-week referral to treatment target. And it specifically includes an extra £1.8bn ‘to support elective activity’ since July this year. 

Meanwhile, there is no mention of extra general practice funding – and this did not go unnoticed among GP leaders. The BMA said that a ‘concrete plan to rebuild general practice’ was ‘glaringly absent’ from the Budget. Council chair Professor Phil Banfield pointed to the union’s pre-Budget demand for an increase in GP funding of £40 per patient, which, ostensibly, the Government has ignored. And the RCGP highlighted that general practice is ‘seriously under resourced’ and called on the Government to put a ‘down payment on its commitments’. 

DHSC told Pulse that ‘business as usual’ general practice funding will be confirmed as part of the usual GP contract process later in the year, including through consultation with the sector. So the overall boost to health spending may translate to increased core funding for GPs in the next financial year – which seems the only logical step for a health secretary who has repeatedly committed to increasing primary care’s proportion of NHS resources. And Lord Darzi’s influential review of the NHS – oft-cited by Government ministers and indeed throughout the Budget – concluded that moving money into general practice ‘should be the fundamental strategic shift that the NHS aspires to make’.

Capital spending and GP estates

Another of Lord Darzi’s key recommendations was to make significant investment into NHS infrastructure, based on his diagnosis that the NHS had been ‘starved’ of capital funding with a £37bn shortfall. Pointing to this disturbing finding, the chancellor announced a £3.1bn boost to capital investment over two years.

It may not come as a surprise that most of this money looks like it will be spent outside of primary care, with £1.5bn of funding directed towards new surgical hubs and diagnostic scanners and over £1bn to tackle dangerous reinforced autoclaved aerated concrete (RAAC).

General practice does get a shout-out – the only specific mention of GPs in the Budget – with £100m of this extra capital funding ‘earmarked’ for GP estates. The ‘dedicated fund’ will allow for around 200 upgrades to GP surgeries across England. This suggests the Government is looking to direct around £500,000 to each GP practice eligible for an upgrade – but the Treasury told Pulse that further details of how the money will be allocated will follow in due course. The Budget document says the upgrades will support ‘improved use of existing buildings and space, boosting productivity and enabling practices to deliver more patient appointments’. 

Now, this money is not to be sniffed at – GPs have long been crying out for upgrades to crumbling, too-small, or unsafe buildings. A recent RCGP survey found that a third of GPs say their practice building is ‘inadequate for providing care for patients’, and GPs responding to a similar survey last year cited issues with poor disabled access, water leakages, mould, mildew, and insufficient clinical space. Pulse has also looked at how inadequate GP estates may pose a threat to NHS England’s workforce expansion ambitions. So any improvement on current GP estates is progress.

But £100m is well below the £2bn that the RCGP has repeatedly called for to tackle GP premises issues. In response to the Budget this week, the college said the investment is a ‘step in the right direction’ but ‘major challenges will remain’. Meanwhile, Dr Bramall-Stainer suggested that the capital investment for GPs is ‘insufficient’. 

The NHS Confederation said the money is ‘incredibly welcome’ given that its members have been raising concerns about their estates for months. But the membership body also warned the Government against getting ‘bogged down with bureaucracy’ in how the money is allocated, calling for the process to be ‘as straightforward as possible’. That’s usually how these things go, right?

National Living Wage changes

The National Living Wage was raised to £12.21 per hour for those aged 21 or above, and from £8.60 to £10 for those aged 18-20 as the government moves towards a single minimum wage rate for all UK adults – and this could also mean higher staff costs for practices.

Medical accountant Andy Pow said that although this 6.7% increase in the NWL is ‘good’ for employees, it ‘further exacerbates’ the issue of how practices fund their staff, since pay differentials between different staff grades ‘will need to be maintained’ and he said that this could mean ‘another year of above inflation cost increases’ for practices.

What about the devolved nations?

The Northern Ireland Executive will be provided with a £18.2bn settlement in 2025/26, the ‘largest in real terms in the history of devolution’, according to Labour. While it did not specify spending on health, this includes a £1.5bn top-up through the Barnett formula, with £1.2bn for day-to-day spending and £270m for capital investment. And according to the BMA, this means that the Northern Ireland government has ‘run out of reasons’ not to ‘properly’ cover GP indemnity costs.

The chancellor allocated a total of £6.6bn additional funding to the devolved governments, which included £3.4bn to the Scottish Government and £1.7bn to the Welsh Government. This will enable ‘substantial investment’ into schools, housing, health and social care, and transport across Scotland, Wales and Northern Ireland, according to the Budget documents.

What next?

In the immediate term, GPs await confirmation from the Government on whether they are eligible for any compensation to cover increased NIC costs. Without this, the impact on UK practices – and patients – could be dire. There is no indication of when this decision will be announced, other than a vague commitment from DHSC to publish further details ‘in due course’. But given mounting pressure from GP leaders, the Government would do well to provide clarity to practices as soon as possible.

Beyond this, the outcome of GP contract negotiations for 2025/26 will be the true measure of how seriously Mr Streeting is committed to rebuilding general practice. The GPCE recently set out what it needs to see in a new contract to end ongoing collective action, which included a guaranteed year-on-year uplift to take account of inflation.

More details on the Government’s longer-term plans for health funding will be revealed ‘in late spring’ next year when the Government’s Spending Review concludes. This week’s Budget covers ‘phase 1’ of the review by ‘resetting public spending’ for the current financial year and setting DHSC and other departments’ budgets for the next. The Government will now move into ‘phase 2’ to determine long-term funding which enables a ‘mission-led, reform-driven, technology-enabled approach’ to public services. But one thing is for certain – any GPs looking for a boost from this Budget will be seriously disappointed today.