Salaried NHS doctors face a two year pay freeze and a pensions shake-up as part of a raft of austerity measures announced in this week’s Emergency Budget.
But higher earning doctors who provide private health services through their own companies will benefit from a reduction in corporation tax.
There will be a review of the public sector pension system to report in time for next year’s Budget. One immediate cost saving measure however announced by chancellor George Osborne is that public service pensions will rise in line with the consumer prices index rather than the, generally higher, retail price index.
Doctors’ leaders delivered muted condemnation of the pay freeze, aware that this will hit four million other lower paid public sector workers much harder than medics. The move will save taxpayers £3.3 billion a year.
BMA council chairman Dr Hamish Meldrum, said: “Doctors understand that these are difficult times and we accept the need to be reasonable and responsible about future pay rises. However, we are seriously concerned that the chancellor has overridden the whole negotiation process between the BMA and the independent review body.”
He pledged that the BMA would fight to protect the value of current and future pensions, pointing out that the NHS scheme had already undergone a major review in 2008.
Stephen Campion, chief executive of the Hospital Consultants and Specialists Association, said: “The two year pay freeze will be disappointing for those affected by it including hospital consultants who in the last three years have been hit by ever increasing national insurance hikes as well as a pay freeze last year. But one has to be pragmatic and say that this comes as no great surprise.”
He also criticised the lack of clarity on the state pension and the announcement that the government would accelerate the date when the state pension age will be raised to 66. This could be as early as 2016.
“The chancellor left a lot of ifs and buts about pensions hanging in the air. The budget was disappointing more for what was not said than was said,” said Campion.
Vanessa Sanders, a director at the accountancy firm Stanbridge Associates said the budget had not made things worse for higher earning medics who have already taken a big hit this financial year losing their personal allowance and being required to pay a 50% rate of income tax.
She advised any doctors with a lucrative private practice to incorporate if they have not already done so to take advantage of the lowest ever rates of corporation tax.
The good news for higher earners includes:
• Corporation tax: for consultants who have incorporated - from 1 April 2011 corporation tax for small companies will be cut from 21% to 20%. Corporation tax for large companies (with profits in excess of £300,000) will be cut from 28% to 27% next year and by 1% for the next three years to 24%.
• Entrepreneurs’ Relief: has been protected - from 23 June 2010, the lifetime limit of gains, which can benefit from ER, and are therefore taxed at 10%, is increased from £2m to £5m. This will benefit doctors who have a private practice or are sole traders who are thinking of disposing of their business or assets following the cessation of a business.
• For consultants who have furnished holiday lettings: the FHL rules will not be withdrawn from April 2010 as previously planned. The government will consult over the summer about plans to change the regime from April 2011. FHL remains a potential alternative tax advantageous investment.
• Higher earners’ pensions: the government will look at alternatives to pension tax relief restrictions for high earners. The current administration believes that reducing pensions tax relief for those that earn £150,000 or more (which was proposed by Labour) would bring “significant” complications to the system. Reducing the annual allowance might be a more preferable option.
Check out your pay scales.
Read more on what the City thought of the Budget.
We are hardly in a position to complain. 90% of the population earn less than half the top end of a consultant’s salary scale and financial austerity is going to hit all. Our Irish colleagues have been hit with a 5% pay cut. If we are to avoid opprobrium and hostility from the taxpayer we should shut up, and grin & bear it.
If only the bankers and top executives thought like us the country would be much better off. I do think that we deserve the pay for enduring years of training and hard work.
I don’t happen to think our salaries are all that outrageous. They compare with upper middle management and some senior managers in a large company and we don’t get any perks like company cars etc. As a junior doctor back in the 1980’s I was earning less than most recently qualified graduates for very long hours. There has been a lot of negative publicity about doctor’s salaries which I fear is an attempt to soften us up prior to a major assault on pensions and terms and conditions of service.
I couldn’t help but have a wry smile at your report highlighting that the big earners, including those with a businesses paying corporation tax, those owning furnished holiday lettings, and those subject to “entrepreneurs’ relief, will all be ok. I wonder how many of the hard working Consultants will be smiling at these “benefits”? No wonder the public have such a distorted opinion of hospital consultants.
I support the austerity measures, since we all have to pay for the debt-laden and spendthrift years of Labour control. I would however point out in a short space of time we have lost our personal allowance, been subject to a higher band of taxation, had our pay frozen, and our pension brought in line with the CPI. I think we have to accept all this as “our effort” and “leading by example”, but I suspect we will continue to carry an increasing burden in paying back the debt over the forthcoming years, and I remain particularly concern about pensions. I sympathise very much with the greater burden to be carried by the lower paid public servants, but I’m still concerned that Consultants are portrayed has over-paid unscrupulous individuals that the politicians will be determined to target.
there is nothing sinister about this pension shake up - the application of basic calculus over the last 20 years would have shown everyone that the nhs pension in its current form is unsustainable. for many decades, life expectancy is growing and growing - how could anyone think that ALL of these extra years of life expectancy will keep being added on to retirement EXCLUSIVELY?!? a 60 year old today has a pretty good chance to make it to 90 - to think that a gold plated, final salary pension could be paid for 30 years to the baby boomer generation requires a degree of ignorance that is mind blowing.
I accept that the nation is in a parlous state - brought about by everyone (both as individuals and as a nation) ‘living beyond their means’. The result is a mammoth debt which has to be repaid. I also accept that ‘the public sector’ has grown to become an unhealthily large proprotion of ‘the economy’. However, I cannot accept that the public sector should bear a disproportionate share of the burden of ‘cuts’ to try to reduce the deficit. By far the majority of public sector workers are amongst the ‘lower paid’ in society; many of their pay agreements were ‘approved’ nationally. So ar as doctors are concerned, their pay is determined by the ‘independent’ Revierw Body - who make their recommendations by comapring both PAY AND PENSIONS with others in the community; so, by definition, cannot be regarded as ‘excessive’.
Thus, if those in the public sector are being asked to make a sacrifice ‘in the national interest’, then those in the private sector should be making a similar, and proportional, sacrifice
My retirement is about 5-10 years away. My first contract was for 104 hours a week. Only 40 of those hours were pensionable. The rest were paid at 30% of normal rate -yes-about a third. One in two, one in three rotas were common. When I got to be a consultant I was on a one in three, and often in, with no recognition or pay beyond basic salary.
By the time I was in my forties, I had worked more hours than most normal people do in their entire career. Is this why doctors who retire at 60 live longer than doctors who retire at 65? I doubt I’ll make it to 90, the stats for surgeons aren’t that good.
I don’t think my pension will be gold plated. I certainly don’t feel guilty that it may be 50% of salary, nor am I guilty that my salary is a high one. I have done a demanding job that 99% of the population couldn’t do, and most wouldn’t do even if they could. I have served my patients for several decades, putting them ahead of leisure time ,family time etc.
If my pension is cut, I will have to face the fact that I have been suckered, and that the NHS is not going to keep its side of the bargain. Fortunately my specialty is in high demand internationally, so it would be bye bye NHS…..