President's column - Budget is Chancellor's chance to dig us out of this NHS pensions hole

The NHS Pensions crisis has continued to make headlines this year with speculation over possible changes in the March Budget hitting the front pages of several national newspapers.

However, characteristically, the government itself has remained tight-lipped. The only thing which appears certain at this stage is that “something” will happen in March.

HCSA has continued to press our case for the abolition of the tax taper as the first major step to ending a crisis which has seen so many senior doctors receive huge bills from HMRC.

In January we sat down with Treasury and health ministers, employers and other doctors’ representatives as part of the review pledged in the Conservative manifesto.

Earlier this month I was part of an HCSA delegation which met officials from NHS Employers. We explained why the profession as a whole is hugely sceptical of flexibilities and its proposal to fund the “scheme pays” bills of doctors who breach their tax relief annual allowance.

When it comes to the payment of tax bills by the NHS, our view is that this is not a sufficiently robust pledge to coax doctors into working overtime. Even if the promise is kept at a later date, it remains an unethical scheme because it appears to be a solution funded from NHS budgets with cash which should go to front-line care. We fear that it is also open to legal challenge as it would only available to a select group.

We also raised the set of flexibilities announced last year which are set to come into force in April.

Many of you have told us that their introduction will not change things – that only tax reform will be enough to create a behavioural shift, due to the complexity and uncertainties inherent in the pensions tax system.

But while we argue that flexibilities cannot “solve” the situation, we are nevertheless pressing for a consistent national policy to ensure those who take them up do not end up much worse off because employers retain their share of contributions.

This is a clear issue of fairness, with HCSA Freedom of Information requests showing that hospital doctors are currently facing a patchwork quilt of policies dependent on their employer.

Ultimately the NHS should not see front-line funding squeezed as a result of a discredited tax system. HCSA is clear in its view that the problem began at the Treasury, and it is for the Treasury to resolve the issue.

So what of press speculation on the Treasury action we may see in the Budget?

One rumoured plan would see the threshold at which pay would trigger a reduced tax relief allowance for pension contributions raised to £150,000.

This would take many hospital doctors out of the taper zone, leaving them with the full £40,000 annual tax relief allowance. Yet it would still leave a pay cliff edge, albeit a higher one, and therefore keep the sword of Damocles hanging over doctors who took on additional responsibilities, greater seniority and waiting list initiatives.

Then there is the rumour of a lower, flat rate of tax relief. This would do nothing to resolve the issues doctors face: it would merely leave them worse off overall.

HCSA has kept our own position under review as this crisis has unfolded.

We have not seen anything so far that would encourage us to change this view: that the taper must go. This would be a simple first step towards removing unexpected tax bills.

In the current context, we do not believe that the abolition of tax allowance caps for defined benefit schemes, such as the NHS pension, while abolishing the lifetime allowance for defined contribution schemes which are seen in much of the private sector, would be considered by the government without a significant sting in the tail elsewhere to recoup lost tax revenue.

HCSA believes that any more wide-ranging tax proposals affecting the NHS workforce must be explored in full consultation with representatives of these staff, not unveiled without warning at a Budget.

Certainly, the seriousness of the current situation cannot be understated. The pension crisis has combined with the vacancy and workload crises into a mix which risks contagion across the entire body of senior hospital doctors.

There is no simple way out of the hole which the Treasury and government have dug. Scrapping the taper, however, would be a prudent first step towards doing so.