National Health Service Pension Schemes (Member Contributions etc.) (Amendment) (No. 3) Regulations 2022
(Limited Text - Ministerial Extracts only)
Read Full debate
The Parliamentary Under-Secretary of State, Department of Health and Social Care (Lord Markham) (Con)
My Lords, I thank noble Lords, particularly the noble Lord, Lord Davies, for bringing this debate today and for reminding me, quite rightly, about learning lessons. I must admit that I have found learning the health brief—which I still continue to try to learn—pretty challenging. Learning the intricacies of tax and pension matters is another dimension that I was not quite expecting in all this—but I will try to repeat what I have learned so far.
The main thing, and a serious point behind the comments from both the noble Lord, Lord Davies, and my noble friend Lady Altmann, is that, to me, it is a sign of the Lords working well that we have this sort of expertise at our disposal. I said in my maiden speech that I wanted to be a different kind of Minister. We have clear expertise tonight, with people all wanting the same thing: to retain doctors, as the noble Baronesses, Lady Masham and Lady Merron, said; and to address the staff shortages that we have, as the noble Lord, Lord Allan, said. These are things that we have to address, and pensions should definitely be part of that workforce analysis.
I would therefore absolutely like to offer that round table that we have talked about. Again, something that I said in my maiden speech was that I have always found it quite strange that we talk across a Chamber; surely, a more productive way is to talk around a table with a cup of tea or coffee and have an exchange of views. So I would definitely like to offer that opportunity to the noble Lords who are interested, so that we can learn from them. I again thank the noble Lord, Lord Davies, for bringing this up, so that we have that opportunity to learn and to try to get it right.
I will tell noble Lords what I think is the premise of what we are trying to do and I will then read my speech, which will probably answer some of the detailed points. I will also endeavour to write with a proper detailed response. As we all have said, we know that what we need to fix is the fact that doctors are voting with their feet. That clearly is the problem and, if we do not try to sort it out, it will just carry on. I am not going to pretend that we have fixed that to date, but we do all understand the problem and I know enough about this subject to understand that a marginal rate of tax of 70% is a clear disincentive to work in that situation.
I have tried to understand ways to address this. The problem is that we know that if we try to address this by changing the whole tax system, it becomes very expensive to change the pension rules for everyone. Understandably, the Treasury has a difficulty about changing the rules for one sector of society and the challenge that might result: the cost of trying to solve the doctors’ situation by changing all the tax rules would be incredibly expensive. The judges’ situation is often used. I believe that the way they get round it is by employers effectively paying them the gross amount, to make sure that they get the same net amount as a result. I appreciate that we would then be paying people who are some of the best-paid workers in the NHS an even larger sum, which, I have to say, sits uncomfortably with me personally, particularly when we are having the understandable pay conversations, disputes and strike actions at the moment.
What we are trying to do in all of this—we are not there yet—is at least get to a situation whereby if it is penal for someone to be receiving this as part of their pension, they can receive it as part of their pay instead, at which point they will be paying the marginal rate of tax, be it 40% or 45%. There will be flexibility and choice: I can either have it in my pension pot, or my personal circumstances mean that if I trip over one of the many different allowances rules and it starts to penalise me and I am disincentivised to work, I can at least get it back in my salary, my pay packet, and get it back that way round instead. That is the principle of what we are trying to do in all of this, so when we come to our round table, that is the approach I plan to bring.
On the statutory instrument itself and the regret Motion, I take on board the point made by the noble Baroness, Lady Merron, and I will take that away. I believe that in this circumstance, the regret Motion is less about this per se—because if we were to vote this down, it would make the problem even worse, because all it is doing is extending the situation to March 2023—and really saying that we do not think it goes far enough. That is slightly different; correct me if I am wrong, but I do not believe noble Lords are actually saying here that they disagree with the SI per se and want it to fall. So, it is not a regret Motion, but we are using this as an opportunity, absolutely in the right way because it means that we brought it to the Floor and had a debate, we got a proper conversation and dialogue and a round table to try to fix the problem. This SI in itself helps but definitely does not fix the whole problem.
So that is the direction we are trying to come from. The proposals I have had the officials explain to me are trying to increase flexibility so that people can dip in and dip out, they can step out completely for a while and then start working again if that suits their lifestyle, and restart the clock in terms of their pension and everything else like that. They can take some of their pension and come back to it afterwards. They are trying to solve those sorts of problems, obviously removing the hour cap and trying to solve things about the abatement hours, all on the principle that we know it is a very valuable pension scheme that many of us wish we had the opportunity to be part of, but it is not quite working properly in the way we need it to. The CPI disconnect, as I understand it, is one of the clear issues there. I understand the issues around what the scheme pays: I must admit it was an education for me to hear that, if we are talking about interest rates of 12.5%, clearly that needs to be understood further as well.
I hope noble Lords can see from my response tonight that I very much appreciate the noble Lord, Lord Davies, tabling his Motion because it allows us to discuss this properly. At the department, we know that this is an issue we need to face, because otherwise doctors will continue to vote with their feet and it can be only to our detriment and the health service’s detriment if we do not fix it. With that in mind, I hope I have picked up most of the questions and, as I say, I will write in detail and offer that round table. I hope noble Lords understand why I do not support the regret Motion and I hope, on the basis of the conversation we have had tonight, that while I very much appreciate that this has been brought for us to talk about and set up the round table, the noble Lord will feel able to withdraw.