Nearly half the cost of lifting the NHS pay cap would be recovered, report says
The Government would recoup nearly half the cost of lifting the NHS pay cap though higher tax receipts and lower welfare payments, a think tank has said.
The cost of increasing pay in line with inflation in the health service would be £1.8 billion per year by 2019/20, analysis by the left-leaning IPPR found.
But the actual cost would reduce to around £950 million when the benefits of the pay boost are taken into account, it said.
When taking higher tax receipts and lower welfare payments into account, the IPPR said the net cost falls to £1.1 billion.
An additional £250 million would be generated in Gross Domestic Product by 2019/20 as a result of the move, with tax income of £100 million, according to the Lifting the Cap report.
Alfie Stirling, senior economic analyst at the IPPR, said: “Although the headline cost of lifting the NHS pay cap is significant, a large portion is recycled back to the Treasury almost immediately.
“If the costs of lifting the cap are funded through higher taxes on the richest in society, the overall effect could also be to increase jobs and economic growth.
“This is because medium income families – such as the majority of those with someone working in the NHS – are more likely to increase spending in the economy, compared with the highest income families who are more likely to save.”
The report comes after Health Secretary Jeremy Hunt confirmed the 1% pay cap on annual pay rises was finally being scrapped in the health service.
Addressing the Commons earlier this month, he said he had been given additional “leeway” by Chancellor Philip Hammond when it came to negotiating next year’s pay round.
The IPPR said additional funding for the pay increase must be covered in the Autumn Budget, and warned the burden should not be placed on the already “over-stretched” NHS.
Janet Davies, chief executive of the Royal College of Nursing, said: “This analysis unpicks the Government’s argument on the costliness of allowing NHS pay to keep pace with inflation.
“Ministers and the public alike might be surprised to learn the true value. Not only it is fair on nursing staff, the Chancellor is left in no doubt how he and the Treasury benefit – increasing pay leads to economic growth.”
She added: “The Chancellor should allocate appropriate funding to cover a pay award at the level of inflation – anything less amounts to another pay cut.
“With unprecedented deficits in the NHS, he cannot ask it to cover pay rises from within existing spending. The NHS must be given new funding to cover the cost.”
Copyright (c) Press Association Ltd. 2017, All Rights Reserved. Peter Byrne / PA Wire.