Chancellor's departure 'must not derail pension tax trap solution'

The surprise departure of chancellor Sajid Javid less than a month before the government unveils its budget must not derail efforts to end the damaging pension tax trap, doctors' leaders have warned.

Former chancellor Sajid Javid (Photo: NurPhoto/Getty Images)
Former chancellor Sajid Javid (Photo: NurPhoto/Getty Images)

With less than a month to go until the government unveils its budget on 11 March, chancellor Sajid Javid quit on Thursday after reportedly refusing to sack his entire team of advisors.

Chief secretary to the Treasury Rishi Sunak - a 39-year-old former investment banker whose father was a GP - has been promoted to replace Mr Javid in the top role at the Treasury.

The replacement of the chancellor and his advisors less than a month before the budget has left doctors' leaders and specialist accountants warning that the government must not lose sight of the importance of solution to the NHS pension tax trap.

NHS pensions

Thousands of GPs and doctors across other NHS specialties have been forced to reduce their working hours or refuse extra shifts to avoid punitive tax penalties linked to growth in their NHS pension pots.

Doctors' leaders say the impact on NHS capacity has been devastating - compounding an existing workforce crisis in the health service.

The government began a review of the NHS pension tax problem last month - in line with a Conservative election manifesto pledge - and has said the review will be complete before next month's budget.

However, solutions put forward publicly to date - such as a potential increase to £150,000 in the income threshold at which tax on pensions kicks in - have been dismissed by the BMA.

Sajid Javid quits

Responding to the departure of Sajid Javid as chancellor, BMA pensions committee chair Dr Vishal Sharma said: 'We look forward to working with Rishi Sunak, the new chancellor of the exchequer - as one of his priorities must be reform of the pension taxation rules.

'There cannot be a single member of the government who is not aware of the BMA’s consistent lobbying and demand for a long-term solution to a situation which continues to penalise doctors for working and be detrimental to patient care. The stop-gap fixes are ineffective and the NHS is running out of time. The current  option - for the NHS’s most experienced staff to reduce the work they do for the NHS - is untenable.

'With the budget less than a month away, the new chancellor must scrap the annual allowance in defined benefit schemes such as the NHS pension scheme, a position backed by the government’s own advisors: the Office of Tax Simplification.'

Association of Independent Specialist Medical Accountants spokesperson Andrew Pow, a partner at Mazars UK said: 'The annual allowance issue is one of the critical areas for the NHS which needs resolving by HM Treasury.

NHS workforce

'How that is viewed as part of wider pension reforms is yet to be seen. The short-term fix proposed by the NHS in England and Wales to deal with pension tax issues in 2019/20 is for the current year only, with specific rules for GPs yet to be announced.

'There remains distrust that the fix does not change tax rules permanently and offers a future income stream which could be reneged upon. Unless permanently addressed, uncertainty will continue to lead to staffing issues in the NHS so it is essential for the Treasury to tackle this in the budget.'

Mr Pow said that 'while any change of the chancellor so soon before a budget is concerning', the fact that Mr Sunak had been promoted from within the Treasury was encouraging. He also pointed out that the new chancellor had recently highlighted GP recruitment problems in his Yorkshire constituency and suggested his background - his father was a GP and his mother a pharmacist - could help him understand the needs of health service staff.

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