Average GP practice faces £40,000 loss after unfunded pay award

GP practices face losses of around £40,000 on average after the government announced an unfunded 4.5% increase in pay for salaried GPs and rises for other NHS staff, accountants have warned.

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(Photo: Andrew Brookes/Getty Images)

The government has backed a 4.5% pay rise for salaried GPs in 2022/23 and a rise for other NHS staff that unions say amounts to a 4.75% overall increase in the health service pay bill, after accepting in full advice from the NHS Pay Review Body (PRB) and the Doctors and Dentists Review Body (DDRB).

However, the government has not provided additional funding to practices to cover the cost of increased staff pay, meaning practices are expected to pay for the rises out of existing GP contract funding.

Under the five-year GP contract agreement that began in 2019, core GP funding rose by 3% in 2022/23 - far short of the pay awards backed by the government.

Pay rise

Specialist medical accountants have warned that forcing general practice to fund the pay hikes without any additional funding will leave a roughly average-sized practice facing losses of £35,000 to £40,000.

The loss would leave a four-partner practice facing a drop in profit of around £10,000 per partner - and could force tough choices over staff and other costs.

The £40,000 hit on practice finances comes just a year after a similarly unfunded 3% pay rise for 2021/22 drove up practice costs by around £20,000.

Specialist medical accountant James Gransby, a partner at RSM UK, told GPonline: 'Each practice will be different. But a practice would typically spend approximately £80 per patient on staff costs - around £15 to £20 of this would be on salaried GPs typically, the rest is admin, nurses, etc - a 4.5% rise therefore equating to a £3.60 per patient increase in total staff costs.

Practice profits hit

'So a GP practice with a 10,000-patient list would experience a £35k to £40k unfunded increase in staff costs which if this were a four-partner practice could see their profits fall by around £10k per partner for this year. This may mean having to make difficult decisions over staffing levels.'

Andy Pow, a specialist medical accountant with Mazars, added that general practice faced a 'perfect storm', with the impact of unfunded pay rises compounding the financial hit for GPs from annual allowance pension tax penalties triggered by soaring inflation.

He suggested that if practices were unable to match pay rises awarded in secondary care, their ability to retain staff could be undermined.

BMA England GP committee chair Dr Farah Jameel said the pay award was a 'kick in the teeth' for both salaried GPs and partners - because it falls far short of the current rate of inflation and is therefore a significant real-terms pay cut and because the government has failed to deliver extra funding to pay for it.

Five-year pay deal

She said: 'For GP partners, locked in a five-year pay deal that was agreed pre-pandemic, and now with inflation sky-rocketing, to offer nothing in addition to recognise their intense efforts and transformation of services during COVID-19, nor to pay their staff the recommended uplift, or meet the increased costs of running practices, is a complete insult.

'GPs and their teams have been at the forefront of the fight against COVID-19 and in May alone delivered an estimated 28.3m patient appointments. To, therefore, fail to recognise these efforts with a fair and substantial pay uplift demonstrates just how little ministers think of GPs.

'The truth is that GP shortages are compromising patient safety, and today’s announcement of another real-terms pay cut for our members is likely to speed up, not slow down, the number of GPs leaving the profession when we need them the most.'

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