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The House of Lords has voted 305 to 175 in favour of making community pharmacies exempt from the higher rate of national insurance set to be imposed on employers from April. 

The vote yesterday (February 25) followed a debate on Liberal Democrat peer Baroness Elizabeth Barker’s proposed amendment to the National Insurance Contributions (Secondary Class 1 Contributions) Bill that would see pharmacies as well as other providers like GPs, dentists, care homes and hospices pay their current rate of NI and avoid Rachel Reeves’ 1.2 per cent hike and lowering of the eligibility cutoff – which has been estimated as costing pharmacies in England an additional £50m.

Baroness Barker’s amendment was carried with a majority of 130 votes, indicating strong support for what she described as an attempt to mitigate a cost hike that would “threaten the existence of large numbers of providers and have a profound impact on budgets”.

The amendment had strong support from Conservative and Liberal Democrat peers, while no Labour peers voted for it. Speaking in favour of the amendment, Tory-appointed Lord Ahmad of Wimbledon said pharmacies had made a “desperate plea” that they “will have to shut” if forced to absorb the tax rises in the chancellor’s budget.

Objecting to the amendment, Labour peer John Eatwell said that picking apart the national insurance taxation system by creating exemptions for certain groups would “wreck the chancellor’s budget” and “scatter” funds through the system, thereby undermining the principle of having simplicity in taxation as he viewed it.

Responding to these remarks, Conservative peer Harold Leigh said he was “amazed,” commenting: “We are a revising house.

“The idea that we should not be changing this because we should not change the Budget is absurd; it defeats the whole purpose of having the House of Lords.”

The bill is due to have its third reading at the Lords today. National Pharmacy Association chair Nick Kaye said: "We'd urge peers and the government to accept this important amendment, which would help pharmacies manage a looming bill of hundreds of millions of pounds.

"This comes in the context of 40 per cent cuts to pharmacy budgets, forcing record numbers to close. 

"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."

Commenting on the news, 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 per cent 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.”