GP contract rise protected as Hammond scraps national insurance hike

Chancellor Philip Hammond has scrapped plans set out in last week's budget to hike national insurance contributions (NICs), a move that experts feared could wipe out the 2017/18 increase in GP funding.

HM Treasury (Photo: Ian Bottle)
HM Treasury (Photo: Ian Bottle)

GPonline reported last week that specialist medical accountants had warned that plans to increase class 4 NICs would 'all but wipe out' the increase in GP funding delivered through the 2017/18 contract deal for general practice.

Under changes unveiled by chancellor Philip Hammond, the main rate of national insurance contributions (NICs) for self-employed people was set to rise.

Class 2 NICs are paid on profits of £5,965 or more, and class 4 NICs on profits between £8060 and £43,000. From 2018, Class 2 NICs were to be abolished, while Class 4 NICs were set to rise from the current rate of 9% to 10% in April 2018 and to 11% in April 2019.

James Gransby, an executive board member of the Association of Specialist Medical Accountants (AISMA) and head of healthcare at MHA MacIntyre Hudson said of the initial budget proposals: 'For GP partners already under financial pressure from high rates of tax and suffering from attacks on their pensions in recent years, the news that their main rate of class 4 national insurance contributions will rise by 2% over the next two years from 9% to 11% will be a bitter pill to swallow.

GP funding

'Not least because this all but wipes out the promised income increases recently announced in the 2017/18 GP contract review.'

However, in a letter to Conservative MPs on Wednesday, chancellor Philip Hammond revealed that changes to class 4 NICs would no longer go ahead. The chancellor had been under pressure to reverse the move amid claims that it did not fit with Conservative manifesto pledges.

The letter says: 'In light of the debate over the last few days it is clear that compliance with the "legislative" test of the manifesto commitment is not adequate.'

As a result, the chancellor writes, the government has decided 'not to proceed with the class 4 NIC measures set out in the budget'. The letter adds: 'There will be no increases in NICs rates in this parliament. We will continue with the abolition of class 2 NICs from April 2018. The cost of the changes I am announcing today will be funded by measures to be announced in the autumn budget.'

GPC deputy chair Dr Richard Vautrey said: 'We are pleased that the government has listened to the concerns of organisations like the BMA and abandoned its plans on national insurance which would have unfairly affected GPs. It would have been simply unfair to have penalised many GPs when they are working harder than ever before to deliver more appointments to patients and would have further undermined the recruitment and retention of GPs.'

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