NHS Pensions

Debate between Stephen Hammond and Steve Brine

Wednesday 26th June 2019 Westminster Hall

[Stephen Hammond]

The hon. Lady is right to make that point; as I said in my remarks about her speech, I recognise the impact on training. There is clearly concern that unless we address this matter, it will have a number of impacts, of which that is one.

The hon. Member for Oxford East (Anneliese Dodds), speaking for the Opposition, rightly opened her remarks by pointing out the scale of the cost of tax release for pensions to the Treasury. She made valid points about doctors’ knowledge about that liability, and about the interaction of core tax principles with particular schemes. I was rather hoping that she would also welcome the long-term plan and the cash settlement, but I suspect that element of unity was probably a step too far.

As my hon. Friend the Member for Poole may have mentioned at the beginning of his speech, we have fewer Members here and a lower number of contributions. However, those contributions, combined with some of the interventions, have meant that we have had a debate of high quality.

Needless to say, I have heard the representations from everyone in the Chamber. It will not surprise anyone that I have received, as has the Department, representations from NHS employers reporting exactly what we have been discussing—that consultants are increasingly no longer willing to work additional sessions. The lost capacity is clearly difficult to replace, especially in some clinical areas where there are already shortages, and it can be expensive, as employers can pay a premium for locums to fill the gap. It is obvious and right that where there is evidence of an impact on the delivery of services, the Government should be prepared to take action.

At the outset, I reiterate that the Secretary of State and I take seriously the concerns of doctors. That is why we have been involved in a number of discussions with the Treasury, which has resulted in the 50:50 flexibility and the consultation. I will come to that in a moment, but, as Members will hear as I develop my remarks, that will not be the end of our conversation with other Departments.

Looking at the case for pension flexibility, it is true that outside public service, employers in some cases have flexibility to adjust benefit packages to allow high-earning employees to target a lower level of pension saving and so reduce the potential for large regular annual allowance tax charges. That flexibility is not currently present in the NHS. The NHS pension scheme does not allow any flexibility over the level of pension growth. Staff who participate in the scheme must pension all regular earnings from their employment. The Government are right to take the view that it is important to ensure that staff have a good level of pension savings, but senior clinicians, particularly consultants and GPs, have a unique degree of flexibility over their workloads and obviously can reduce their commitments. Consultants can reduce the number of additional sessions undertaken, and many GPs are self-employed. That can create incentives for clinicians to seek to control their income and pension growth by limiting or reducing their NHS work to avoid breaching their annual allowance. As a number of Members have discussed, that clearly has an impact on the delivery of patient care.

It is clear that retaining and maximising the contribution of our highly-skilled clinical workforce is crucial to the NHS and the long-term plan for the NHS. While any pension tax regime should seek to achieve the fiscal ambition of distributing pension saving incentives fairly, it has to be recognised that, in combination with the fixed structure of the NHS pension scheme, that could produce—listening to the evidence today and the evidence I have directly received—unintended consequences for service capacity and the delivery of patient care. The Government are prepared to change the rules to give clinicians more flexibility.

Alongside the publication of the “Interim NHS People Plan” earlier this month, my right hon. Friend the Secretary of State announced our intention to consult on new flexibility for clinicians. The consultation will be published in the coming days—I hope very shortly—and will set out proposals for a 50:50-style option, offering 50% pension accrual and halved contributions. Earlier this year, as part of the new five-year GP contract, the BMA and NHS England asked the Government to consider introducing that option. While I recognise that the BMA has not been unequivocal in its support, it has welcomed the proposal as a step in the right direction.

The Government believe that a 50:50 option balances the benefit of flexibility with the fiscal impact to the Exchequer. The 50:50 option will allow clinicians to build up their pensions more slowly and at a lower cost. Clinicians will still need to make their own personal assessment as to whether their financial interests are best served by taking advantage of the 50:50 model or continuing with full-rate accrual, but I have heard—not necessarily in the debate today, but directly from a number of consultants—that the 50:50 option is not flexible enough and that other measures should be considered.

The new pension flexibility should be viewed as a positive development for clinicians. My hon. Friend the Member for Winchester mentioned that he has asked me about the consultation period on the Floor of the House and that he has spoken to consultants about it. The consultation will be an opportunity to listen to a range of views before any final proposition is agreed. I encourage all Members here today to encourage their local clinicians to take part in that consultation. Equally, I encourage anyone from the health system in its widest context to take note of the debate and take part in the consultation. We want not only to hear any suggestion that there is a generic case for tax changes, but to listen carefully to what clinicians say using their own personal examples to provide evidence for any change they seek.

[Steve Brine]

Is the consultation discussing the merits or otherwise of a 50:50 option, or is it genuinely open to discussion about whether that option in itself is a good idea? As I said in my speech, the initial responses I have seen have not broadly welcomed, to put it politely, the idea of 50:50.

[Stephen Hammond]

The consultation is both. I recognise, as I said a few moments ago, that the 50:50 option has not received unequivocal support from the BMA, but to its great credit, it has asked us to consider that. We have come forward with this proposal. The BMA has welcomed it, but has said that it would want to discuss further options for flexibility and other pension matters. We have said that the consultation will look at the merits of the 50:50 option—or question it—but we will rightly open up that consultation to other suggestions. My hon. Friend will have just heard me say that I hope Members will encourage their local clinicians to use the consultation as a way of expressing their concerns about the 50:50, if they have any, and to express their views on other measures they would like to see introduced in terms of pension contributions. I stress that point again in response to his intervention. He will probably be interested in my next set of remarks, which are on flexibility.

Although the 50:50 option provides a new flexibility, we recognise that it does not provide unlimited flexibility for clinicians to target their own personalised level of pension growth and contributions. The financing model for the scheme means that any flexibility that reduces contribution income has an immediate fiscal impact on the Exchequer. The 50:50 option does not set aside the annual and lifetime allowance tax policies, but will give clinicians a new flexibility to manage their pension growth.

Where 50% accrual reduces pension growth by more than they wish, clinicians can use the contribution savings from the 50:50 model to buy additional pension to customise their own pension growth incrementally. Additional pension can be purchased in units of £250. That clearly adds some flexibility to their ability to manage their own contributions. However, some clinicians may continue to experience annual allowance tax changes, even with accrual rates reduced to 50%. For that group, while 50:50 reduces the charge, it does not eliminate it. We recognise that a number of individuals may wish to target a lower level of pensions growth. We will listen carefully to that suggestion through the consultation.

Interim NHS People Plan

Debate between Stephen Hammond and Steve Brine

Wednesday 5th June 2019 Commons Chamber

[Stephen Hammond]

I thank the hon. Lady for welcoming the plan. I think she will accept that this is a good interim plan; it is a stepping stone. She asks what we are doing to fill nursing places. I point out yet again that we are increasing applications and ensuring that there are 5,000 extra clinical placements available, which is a 25% increase on last year. Far from being complacent about the number of nursing applicants, we are looking to ensure that more nurses can be trained in this country, beyond the 35,000 who are being trained at the moment.

The hon. Lady asked about doctors. The Royal College of Physicians has made it clear that we need more medical school students. We are committed to increasing the number of undergraduate medical school places for domestic students by 1,500, with the first 630 being taken up last year. By 2020, there will be five new medical schools across England, helping to deliver—[Interruption.] Of course it takes time, but if we do not take that step now, we will never make the end of that journey. That has been a consistent problem for many years. There are still more doctors coming through now, but we need to do more, which is why this plan is being put in place.

The hon. Lady will have heard me say to my right hon. and learned Friend the Father of the House that there are more than 63,000 EU nationals working in the health service. That is more than there were in December 2017, and over 5,000 more than there were in June 2016. She is right to point out that we want those skills in the right clinical areas. I reiterate what I said a moment ago: we wish to make it absolutely clear that the contribution of EU nationals working in the health service is extraordinary and valued and will continue to be so.

The hon. Lady briefly mentioned pensions. She will have noted that we launched a consultation yesterday, setting out some ideas. I am pleased to say that the British Medical Association has welcomed them but asked us to look at other flexibility within the pension rules. I encourage the hon. Lady and all consultants to take part in that consultation.

[Steve Brine (Winchester) (Con)]

The Minister knows from our time together in the Department how much I welcome the interim people plan. It simply is the turnkey without which our long-term plan just cannot work. He is aware of how important retention is, and that is at the heart of the plan. I know he has mentioned this several times already—and consultations are great, and I will encourage my constituents to take part—but may I ask him to look urgently at the changes to the NHS pension scheme in relation to the annual allowance and the lifetime allowance? My trust has contacted me to say that senior consultant doctors and senior nurses are receiving unexpected tax bills of tens of thousands of pounds—up to £50,000—which is starting to have an impact on decisions about their future and the additional sessional work they are prepared to take up. This is impacting on patient care now, so on behalf of my constituents, I urge him—I know he will take this seriously—to look urgently at the NHS pension scheme issue.

[Stephen Hammond]

Again, my hon. Friend was absolutely right at the start of his question to point out that this is a key stepping stone to making sure that the long-term plan works. He is also absolutely right to point out that we recognise and have taken extraordinarily seriously the difficulties that a number of clinicians have had with the pension tax changes. He will know from his time in the Department that we have been in continuous discussions with the Treasury about what options may be available. I have set out today that the consultation will propose a new 50:50 option for higher-earning clinicians to halve the rate of pension growth in exchange for halving contributions. I accept that that is only one part of the solution, but it is a step forward. I welcome contributions to the consultation, and I urge him and his consultants to take part.