NHS Pensions

Debate between Anneliese Dodds and Philippa Whitford

Wednesday 26th June 2019 Westminster Hall

[Anneliese Dodds]

I certainly will, Mr Gray. Thank you.

As I was saying, this debate is broadly around the contours of the taxation system and how they affect high-paid workers in particular. I am sure that the hon. Member for Winchester is aware that Labour has a different approach from that of the current Government around progressive taxation. We set out our proposals at the last general education: we indicated how, by increasing the tax paid by the very best-paid workers, we would free up the resources that are necessary. I am sure that he has seen what Labour produced in that regard—in particular, we would not pay for the boost in spending that the NHS needs only through a short-term windfall, which in practice is what the Chancellor did, because all the commitments that the Government made to the NHS were as a result of lower than projected spending and higher than projected taxation receipts.

That is not a sustainable way to fund our NHS in the long run. Instead, we should look at the longer-term measures that are necessary, which is exactly what we have been doing.

We need to ensure that NHS workers on lower incomes can save properly for retirement, but we also need to look at the situation that has been the focus of today’s debate. We need to focus on the changes that were made in the 2015 pension scheme, and how they interact with the variety of alterations that have been made to tax release. It is especially important to do so in the context of staff retention, and I understand the comments that Members have made about that topic. We have a particular problem with NHS staff leaving their jobs early, which in my experience is not merely because of these issues, although of course they are important. When I talk to senior staff in the NHS, they also mention stress, a general lack of resource, having to deal with short-term changes such as operating theatres being closed because of a lack of staff, and so on. A whole variety of features is driving those retention problems.

[Dr Whitford]

I accept that there are many other issues, and obviously all four UK health systems are stretched because workforce is their No. 1 issue, but this problem comes on top of that. People who feel stretched—people who feel they have a terrible work-life balance, who are working late and so on—suddenly find that the extra sessions they do are costing them money. That is a final slap in the face.

[Anneliese Dodds]

I am aware of that; for many, this issue can be the straw that breaks the camel’s back, especially when it is not anticipated.

I hope that the Government will look carefully at the impact of threshold effects, particularly cliff edges that lead to radical changes in the amount of tax paid, which is a significant problem with the UK tax system generally. The situation for incurring VAT is analogous to this one: small businesses are deliberately staying below the threshold because as soon as they go over it, they have to start paying VAT—not necessarily at a very high rate, but with all the bureaucracy and so on that comes with it. This situation is very similar: there is that cliff edge, where tax treatment suddenly becomes very different from what it was before.

In the long run, Government should aspire to learn from the best of what happens in other countries that have a more granular approach; where income is more tightly tied— and sometimes entirely tied—to tax treatment, so that as one’s income goes up, tax liability goes up stepwise. That seems a very sensible approach, but of course, getting there is a long-term aspiration. In the short term, I hope that the Minister—who I know is an open-minded person—will ask his Treasury colleagues to sit down with the experts and representative organisations, and talk to them about how these problems arise because of the interaction of the complex pension system with the complex treatment of tax release, so that there can be some kind of short-term fix with a view to, in the long term, having a much more rational approach to tax release on pension contributions.