How Rachel Reeves Budget Hits non-working Pensioners. Hard

This is a personal story about how my family have been affected by the National Insurance increase

In her Budget speech on October 30, 2024, Chancellor Rachel Reeves stated that “working people” would not see increases in income tax, National Insurance, or VAT, fulfilling a promise made by Labour during the general election.

Note the term “working people.” This specifically excludes non-working people—in my family’s case, our pensioner father.

The new Labour government, elected in July 2024, made an early announcement that the winter fuel allowance of up to £300 would be withdrawn from most pensioners who have modest savings or whose pensions exceed some undefined “liveable” level.

My father doesn’t qualify for the winter fuel allowance, as he lives in a care home. Fair enough. At the age of 100, Dad has been in a care home for 18 months and, although the oldest resident there, is fortunately one of the most active. He can still walk to the car for outings to a coffee shop or pub, and he takes daily exercise by walking up and down the corridors.

This brings me to the Budget and the Chancellor’s statement that “working people” would not see tax increases. My dad, however, will see increases.

As a non-working person living in a care home, he will have to reach into his pocket to cover the National Insurance hike. A working person won’t see a penny deducted from their income, but my father will bear the cost indirectly.

Last week, the family received a letter from the care home, announcing that in April the company will increase fees. The reason? To cover the employer’s National Insurance rise, the adjustments to the minimum level of that payment, and the increase in the minimum wage for staff.

This means that my father and his 60 or so fellow residents will face increased fees specifically to offset the National Insurance changes introduced in Rachel Reeves’ Budget. And this won’t just impact my dad—this care home operator runs many facilities across the country, meaning thousands of other residents will also be affected.

My 100-year-old father is, therefore, a victim of the 2024 Labour Budget, which promised that “working people” would pay nothing more. He doesn’t work; he’s a pensioner. So he pays.

The care home hasn’t provided an exact figure for the increase or even a ballpark estimate, but the financial impact won’t stop there. Each April, standard care home fees rise in line with inflation, plus an additional small percentage. That increase, not yet confirmed, will be announced early in 2025.

In practical terms, this means that, due to the Labour government’s Budget, my father and thousands of other care home residents will face a double financial blow in April: one increase to cover the annual inflation adjustment, and another to pay for the National Insurance hike. This amounts to a direct tax on non-working care home residents.

Another consideration is the role of local councils, which often contribute to or fully cover care home fees for certain residents. (For clarity, my father does not receive any council funding.) Care home operators will undoubtedly pass on their increased National Insurance costs to councils.

The question here is whether the national government will provide additional funds to local councils to cover this added financial burden—or if councils will be left to find the money from their already overstretched budgets.

Regardless of one’s views on the National Insurance increase, this situation raises questions about whether the Labour government, and specifically Chancellor Rachel Reeves, considered the effects of these measures on care home residents.

Given that the vast majority of pensioners seldom vote Labour, one might suspect the thought briefly crossed her mind—only to be dismissed. After all, having already removed the winter fuel allowance from many pensioners, why not put further financial strain on them to pay for the budget increases?

This seems to be an easy calculation for the Labor government: the majority of older pensioners are not traditional Labour voters, so why care? It won’t affect taxpaying MPs' personal pockets, as promised—just pensioners.