The recent GP pay award will deliver a 1.16% rise in overall contract payments for 2015/16. Ministers claim the award will deliver the 1% pay rise for GPs that was recommended by the Doctors and Dentist Review Body (DDRB).
This year’s DDRB report makes for some interesting reading. For those of us who have been around for ever, there are some pointed differences to the methods that the DDRB worked to in the distant past.
But before we get on to that, let’s talk about the Budget. There is one item that could have a significant impact on the GP workforce. The pension lifetime allowance is to be reduced again, and this time to just £1m. Bear in mind that just a few years ago, the allowance was £1.8m.
The significance of this is that once a GP’s pension exceeds £43,000 per year, they will exceed the £1m lifetime allowance and, unless they have some protection, their hard earned and expensive pension fund will be reduced by a tax charge of up to 55%.
Since many GPs are hanging on to ensure they get their maximum pension, this single measure could encourage a number of GPs to take their pension by 5 April 2016. There will hopefully be some protection in place, but some GPs may decide there is little point in continuing to grow their pension, and they might decide to beat the reduction and take their pension and semi-retire.
Back to the DDRB report. In former times, the DDRB would set intended average net income (IANI) and intended average gross income (IAGI). In practice, this meant that the DDRB would decide what GPs should earn net of their expenses (IANI) and would work out what fees would have to be paid to the practice to achieve this (IAGI). The important bit is this, the DDRB would also check that the previous year's award had delivered the intended pay rise to GPs, if it had not, the shortfall was added to the following year’s recommendations.
In the detail of this year's recommendation, the DDRB comment that recent awards have not delivered the pay rise as intended, but there is no mechanism to add the shortfall to a subsequent year. Pity.
The award this year is intended to give GPs a 1% increase in net income after expenses, and the DH has worked out that this needs a 1.16% increase in fees payable to GPs.
According to my sums, if the increase in expenses, excluding staff and salaried GPs and locums can be limited to 1%, that leaves a 2% increase to be used for staff, salaried GPs, and locums. Since the employers superannuation increases by 0.3% that leaves 1.7% to be spent. Challenging times...
Laurence Slavin is a partner with Ramsay Brown and Partners Chartered Accountants who specialise in the finances of GPs.