PARLIAMENTARY DEBATE
NHS Pensions: Taxation - 8 July 2019 (Commons/Commons Chamber)
Debate Detail
Some senior clinicians face pension tax charges owing to the increase in the value of their pension accrual. I understand that the Secretary of State for Health and Social Care is currently engaged in discussions with senior representatives of the British Medical Association. The Government are taking this issue very seriously, and that is the right place for those discussions to be held. However, the House will recognise that the same tax rules must apply identically to everyone in the same situation, regardless of their employer. It is simply not possible for the tax rules applying to senior clinicians in the NHS to be different from those that apply everywhere else.
I understand that the Secretary of State for Health and Social Care is to publish a consultation on proposals for a new 50:50 scheme providing pension flexibility for clinicians in the NHS. The scheme will give senior clinicians in England and Wales more choice in respect of their pension accrual, and will thus control tax charges. Since last autumn, all members of the NHS scheme on the taper have been able to elect for the pension scheme to pay any tax charges now, and so avoid any impacts on take-home pay, in return for an actuarially fair reduction in their pensions.
I recognise the concerns that have been raised, and I assure the House that the Government will continue to monitor the impact of pensions policies on public service delivery.
We do not have conscription for healthcare staff; we cannot force them to do weekend overtime or more sessions than they want to, and it is not surprising that they choose not to if they are being made worse off as a result. For example, in The Guardian this morning we learned of one senior anaesthetist who worked 27 Saturdays last year in order to reduce waiting lists and has now said he cannot afford to work any extra Saturday shifts this year because it would give him a large tax bill he cannot afford to pay.
Very few doctors have earnings that exceed the adjusted income threshold of £150,000, but due to the inclusion of hypothetical pension growth as income, doctors are being affected by tapering. This is different from what the Chancellor said in Treasury questions on 21 May when he said that someone has to be earning over £150,000 a year before the tapered annual allowance affects them. Taxable income and adjusted income are very different as regards pensions taxation.
The Government should also be aware that members of the imposed 2015 pension scheme had no option but to become a member of multiple schemes including the GP CARE—career average revalued earnings—scheme and as a result incur significantly higher annual allowance tax bills than those members who are protected members in only the final salary scheme. This means that all full-time consultants who are a member of more than one NHS pension scheme will be affected by the tapered annual allowance and will need to reconsider how much work they do for the NHS to mitigate these tax charges. Furthermore, this punitive pensions tax penalty means that doctors are not just working less but are retiring earlier than they would like to in order to avoid significant additional tax charges. In a survey of more than 2,400 consultants, more than half cited pensions taxation as a reason for their decision to retire early.
I therefore have five questions for the Chief Secretary. As the 50:50 pensions accrual option proposed does not remove the unintended consequences that are forcing doctors to reduce the work they do, can this be included in the consultation so that this issue is raised? Once the scope of the consultation has been extended to cover this essential aspect, can it then be launched as quickly as possible? Can the consultation be brief as the issues are well-known and well-rehearsed, and can the Government then respond quickly to it and if necessary legislate given that there is likely to be cross-party support for these important measures to protect the NHS? Can timely pensions statements be provided to all NHS staff who are affected by these measures? Finally, can the Government confirm that they understand the urgency and importance of this issue and that they will act without delay to prevent a deteriorating situation from getting even more acute?
The worst-case scenario that we all feared has become a reality. Hospital leaders are raising the alarm that waiting lists for routine surgery have risen by up to 50%. Unless this issue is dealt with, there is a risk that the approach of the end of the financial year will lead to even greater levels of working to rule after the summer.
The changes that have led to these issues relate to the interaction of the taper, which George Osborne introduced in the summer Budget of 2015, with other rules on tax reliefs and the three NHS pension schemes. Despite decisions being taken around these measures some time ago, there appears to have been next to no communication by the Government with representative groups about this issue until the crisis had already begun. That is very different from the “constant review” that the Chief Secretary to the Treasury has just referred to.
It is fair that tax reliefs should be consistent with other core principles of taxation and that the pension allowance should decline progressively for those people who earn high incomes. However, at issue here is the interaction of that system with the NHS pension schemes, on which the representative organisations maintain they were not properly consulted. Many consultants are only now becoming aware of their liabilities. I asked two weeks ago, and I ask again, whether the Government believe that their communication with those affected has been sufficient. Furthermore, does the Chief Secretary to the Treasury believe it is acceptable that many of those affected have not even received pension statements in a timely manner, due to delays by Capita? Surely that is only exacerbating these problems.
The Government have maintained—the Chief Secretary to the Treasury did this again a moment ago—that this issue will be solved by the 50:50 pension option proposed in the NHS people plan released last month. However, a number of representative bodies have already expressed concerns about this option. So my third and last question to the Chief Secretary to the Treasury is: what discussions has her Department had with the Department of Health and with those representative bodies about the 50:50 scheme? It has been painfully clear from the Westminster Hall debate, and again this afternoon, that there has been an abject lack of co-ordination across Departments on this issue.
I am sure that many of us are concerned about the lasting impact of today’s crisis. NHS staff retention is already poor. This issue is one of many affecting dedicated senior staff, with large numbers raising concerns about levels of stress and a general lack of resource. A whole variety of Government failures is driving these retention problems. Today’s crisis is likely to add to this, with confusion over pension relief pushing many to retire earlier than they previously would have done, or encouraging some to opt to take on additional private work. I am concerned not only for those consultants but for their patients. There are currently 100,000 NHS staff vacancies; that is one in 11 of all NHS posts. This latest failure will see yet more delays for people in desperate need of care, unless the whole of this Government, working together, get a grip.
The important thing to remember is that, while we need to look for NHS-specific solutions—which is precisely what the Health Secretary is working on—the broader issue of taxation cannot be looked at just for one profession. The broader issue of the pension system has to be looked at in the round and in the whole. I am not going to stand at the Dispatch Box today and announce an entirely new pensions policy. We are pragmatically dealing with the situation that has arisen in the NHS, and of course we continue to review our pensions system to ensure that it makes financial sense for those people contributing to it as well as for the Exchequer. We pay more than £50 billion-worth of pension tax relief and it is important that we get value for money for that—that is why the reforms were conducted earlier—but of course we continue to review the arrangements to ensure that they are providing value for money as well as the right incentives for people to save for their later age.
May I briefly flag up another issue? One of my constituents, who wrote to me recently to say that he had requested an update on his pension, was told that it would take three months. He was then informed that Primary Care Support England had not updated his pension records for three years and that he would have to wait a further three months once they had been updated. Will the Minister also look at the delays facing doctors trying to get an update on their situation?
It is not surprising that many health professionals are choosing not to do the extra work or are simply retiring earlier. My right hon. Friend the Member for Wokingham (John Redwood) makes a key point, because extra earnings would take many of these people into the slice above £100,000 to £125,000, where a 62% tax charge applies.
This is not just an NHS problem. My concern is that we are putting a brake on those entrepreneurs who want to create enterprise, jobs and the tax payments of the future. A simple step would be to get rid of the lifetime allowance.
I recently attended a briefing for Fife’s elected representatives at which Fife Health and Social Care Partnership confirmed that an inability to recruit GPs means that the out-of-hours GP service in Glenrothes will remain closed almost permanently. We were given an update on the worrying number of GP practices—more than one in five—that are having difficulty recruiting and retaining GPs. The director of the partnership told us in terms that the pensions issue is a real one for medical staff, not just for GPs. In that context, it is not acceptable for the Treasury or, indeed, the Home Office, under reserved powers, to lob a hand grenade into our health service and expect the four devolved health services to fix the problem. Will the Chief Secretary tell us what assessment was made of the impact of the changes on the health service? Will she undertake to publish that assessment in full?
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