- Government guidance says public sector employers would have to increase their contributions to cover a shortfall in their pension schemes
- But the Treasury says extra funding will be provided to cover the costs to the NHS
The Treasury says the increased costs of NHS pension contributions will be met with additional government funding, and dismissed claims to the contrary made by the Labour party.
A government statement last month said public sector employers would have to increase their contributions to cover a shortfall in their pension schemes.
The statement committed to covering the costs in 2019-20, the first year of the increased contributions, but made no commitment for subsequent years.
This prompted Labour shadow ministers to accuse the government of effectively cutting NHS budgets by an estimated £1.35bn per year from 2020-21, to pay for the shortfall. This was reported on the front page of the Daily Mirror.
However, the claims do not appear to have taken account of a previous statement from prime minister Theresa May, when she set out the long term funding settlement for the health service.
She said in July: “Under our plan, NHS funding will grow on average by 3.4 per cent in real terms each year from 2019-20 to 2023-24. We will also provide an additional £1.25bn each year to cover a specific pensions pressure.”
A government spokesman restated this when contacted by HSJ today, saying: “Under our plan, the NHS will receive increased funding of more than £20bn per year by the end of 2023-24. We will also provide an additional £1.25bn each year to cover rising pensions costs for NHS staff.”
This would fall short of the estimated costs by around £100m, and it is unclear whether the government would increase its support if the estimate proves correct. Labour said the estimated costs were based on analysis by the House of Commons library.
It does not appear that similar commitments – to fund the extra costs from 2020-21 – have been made for other public sector employers.
The changes are due to lower long term economic growth forecasts from the Office for Budget Responsibility, which increases the projected burden of future public sector pension promises.
Treasury statement to HSJ and Labour press release
1 October 2018