NHS Pensions

Paul Masterton Excerpts

Wednesday 26th June 2019 Westminster Hall

[Sir Robert Syms]

Almost anybody I talk to in any hospital anywhere has an example of the impact of this additional taxation biting, and its impact on working methods. I know my hon. Friend has tried to get a debate on a similar subject, because we are ultimately talking not about consultants, but about the patients and the impact this has on delivering services.

For defined benefit pension rights, the test against annual allowance is complex. The growth in rights over the year must be adjusted to strip out any increase that simply keeps pace with inflation, and is then multiplied by 16 added to any additional lump sum accrual before being tested. Whether the tapered annual allowance applies depends not just on whether someone’s adjusted income is over £150,000, but on whether their threshold income is over £110,000. These two measures are quite different, and adjusted income in particular is calculated in a very complicated way.

That creates unpredictability. A tapered allowance works by using income from the current year to determine the size of the annual allowance for the current year. Many NHS doctors work extra NHS shifts and many do private work; they may have little idea what their income for the year will be until very late in the year. Sometimes, NHS trusts get additional money released at the end of the year, leading to more operations. Sometimes, NHS trusts pay at a rather slow rate, and they may pay in a different year from that in which an operation was undertaken. As a result, doctors who take on a lot of extra work late in the year can suddenly find they have an annual allowance issue.

There is also a cliff edge issue. Although the tapered annual allowance result is a gradual reduction in annual allowance for each £1 of adjusted income over £150,000 per year, the fact that the whole system switches on abruptly for threshold income above £110,000 can create a violent cliff edge effect. For example, those with threshold income that is 1p below £110,000 can effectively ignore the tapered annual allowance, but those with income that is 1p above it can find themselves caught with a rather large tax bill. For the latter group, not only does each extra £1 attract income tax at 40p and a loss of personal allowance equivalent to another 20p in the pound, but they can suddenly face a big drop in their annual allowance.

Some people can be worse off overall by working an extra shift. I have heard testimony to that effect from many doctors who say they have done additional work and ended up worse off.

[Paul Masterton (East Renfrewshire) (Con)]

I congratulate my hon. Friend on securing this debate. I hope he will not mind my taking the opportunity to plug the event I am hosting with the BMA next Wednesday between 4 pm and 6 pm, which will be a great opportunity for MPs to meet many consultants with stories such as this, and to find out more information about the problem. Does he agree that, because this matter is so complex, it is important for MPs to come along and speak to the BMA, and speak to their local senior consultants, to really understand the impact this is having on the ground?

[Sir Robert Syms]

I thank my hon. Friend for his contribution. This is an area that people start to get interested in only when they start thinking about retirement. Then they realise how complicated the retirement rules are. This issue is upsetting many people who work in the NHS because of the impact it is having.

A survey of GPs to which 46% replied—354—found that their average tax bill owing to the tapered allowance was £18,500, so we really are talking about considerable sums of money being levied on doctors, many of whom do not expect it and suddenly get into arrears. Dr George McInnes, radiologist at Poole Hospital, said to me that most of his radiologists are contracted for 10 sessions, with most working 11 or 12 as a matter of norm to keep the throughput going. However, as is the case in most hospitals, he now finds it terribly difficult to get them to do more than 10, and when people come to review their contracts, they ask to do less work, rather than more, because of the impact of the pension arrangements.

The real problem is that most of the people affected have done years of training and have years of experience—they are the super strikers of the NHS; the team leaders—and despite tax bills have a loyalty to their hospitals and teams and continue working. However, year on year, they find themselves penalised for working. As rational people, they decide to play golf or to spend more time with their families or with Netflix. That is logical, and the Treasury is deterring many people from doing what they have trained for their whole lives to do. The letters, emails and phone calls I get from doctors do not say that they want to work less. They actually want to work more, but they do not really feel that they should work more and be worse off as a result.

The Government have put additional resources into the NHS, and we can argue about whether it is enough or not. However, the key point from the Treasury and the Department of Health and Social Care was the importance of productivity in the NHS, which we can get only if the people within the service are actually able to deal with patients and the issues before them. If, because of the tax issue, people work less, the only way around that—apart from locums, if they can be recruited —is to recruit more people to do fewer operations. That is not increased productivity; that is reduced productivity. If we want to use these people, we have to set a tax system that is proportionate and sensible.

It is not only the NHS. The British Dental Association says the same thing: people are retiring early and are more averse to taking on NHS patients. The consequence is the problem that we are now starting to see, which will get worse and worse. I know that the Department of Health and Social Care understands the issue; I have talked to the Secretary of State. I think the Treasury sort of understands that there is a problem, which is why I think it indicated that it might give additional resources to the NHS. However, the problem is that the only way out of this is to get rid of the taper, because its impact on the way people work is so detrimental to the NHS. Even if we take into account wider issues and other areas, I cannot see how any scheme can be brought in to ameliorate its impact.

We in this House want patients to get the best service, and sometimes we have to pay people to get the best service in the national health service. Most consultants or senior nurses have trained for years and are dedicated to their patients, and all they want to do is to turn up and work. The Government have put money into the NHS to allow operations to take place, but perversely our system of taxation on pensions, which was probably drawn up to stop city slickers avoiding tax, is impacting on a major, important public service and will lead to longer waiting lists, meaning people—who, if not in pain, will be very uncomfortable—waiting to be dealt with.

We all want people to be dealt with, doctors to be happy and the NHS to work properly. We need the Treasury to get out of the way on this one, because it is causing problems.