A cheap shot from the Taxpayers' Alliance

An irritating rant from the Taxpayers’ Alliance (TPA) drops into my emailbox.

Now, do not get me wrong. The increase in taxation over the last ten years has been outrageous. Gordon Brown’s stealth taxation has bordered on fraudulent. When I was a child, it was only rock stars, fund managers and stockbrokers who paid top rate tax. Gordon Brown consistently refused to index the tax bands, so that now we have police sergeants and senior nurses paying it. Crazy. Something needs to be done about that.

The TPA go to the other extreme. Their mission statement is both simple and simplistic. Reduce taxation. At all costs. At any cost. Does not matter who suffers.

Today, the TPA is having a go at people who work in the NHS and, guess what, in particular at GPs.

There are almost 8,500 retired NHS employees (including GPs) in England and Wales with retirement benefits worth £1 million.

There are certain sums of money that strike a chord with the public. The £100,000 barrier for salaries (as in “some GPs earn as much as £100,000” ) and the £1 million barrier for pension pots. As a cynical but subtle pressure group, the TPA provocatively headlines “£1 million pension pots for NHS workers.” To the man in the street, who does not understand the cost of pensions any more than he understands the cost of healthcare, a £1 million pension pot sounds like a lottery win. The TPA knows that. It is a red rag to a bull, and the TPA knows that too.

Let us look at this rationally.

If you are sixty years old, and wish to buy an annuity for a fixed £5000 a year, with half to your partner on your death, it will cost you, give or take, £100K. If you want that pension indexed against inflation it will cost you £200,000 or more. And if you want the usual £15,000 lump sum as well, you can add a bit on to that. So, if you want an indexed linked pension of £30,000 a year, you are going to need pension pot of well over £1 million.

A senior nurse, who retires at 60 after forty years continuous service in the NHS, might well have a pension of £30,000. Does anyone begrudge her that? Of course, that is not the message the TPA wants to give. There is no headline saying “Our angels are to retire on a decent pension” just the usual cheap shot at GPs. Why mention GPs specifically? Why not say “including senior nurses”? That would not have quite the same impact, would it?

The TPA does mention, en passant, a seemingly trivial matter:

Unfunded public sector pension liabilities are reaching completely unsustainable levels.

Unfunded? Just a minute. NHS pensions are not unfunded. NHS pensions are contributory pensions and GPs in particular have huge and rising monthly superannuation bills. So where has all that money gone? You mean, the government did not put it all under the mattress?

Gordon Brown

You mean Gordon Brown put it in the current account and spent it? Surely not. Only Robert Maxwell spends the employees’ pension fund contributions. No reputable government would do that.

There is also the implication in the TPA article that NHS employees can skip off early with full indexed linked pensions. They cannot. Take GPs pensions (full details here), about which I know a little. They are not truly final salary pensions. They are based on 1/80th per year of life time earnings. A full pension is 40/80ths and can be taken after 40 years service. After five or six years of medical school, perhaps a year abroad, and MD, a BSc or whatever, many doctors do not join the NHS payroll until they are 25 or 26. They have no possibility of a full pension until they reach 65 or more, and that pension is only half the average annual earnings, not the more generous two-thirds that senior civil servants receive.

Early retirement is a theoretical option from the age of fifty. But there is a huge financial penalty. Start work at 25 and go at 50 and your pension is only 25/80ths of the final pension, is actuarially reduced by a further 25% and is not indexed until you are 55. For most employees, it is not a viable option and rightly not. Retirement at 50 should not be featherbedded.

The government has not made proper allowance for public sector pensions and, indeed, has had its hand in the pension pot. And remember, all those city people have already taken their cut to fund their January bonuses and their own early retirement pension pots. How many stock brokers, fund managers and investment bankers carry on to the age of sixty? Perhaps the TPA would tell us that.

The baby boomers are retired or retiring, and some of their children are not far behind. There is a demographically charged pension time-bomb ticking away. Something needs to be done, that is for sure. But it is not just GPs, or doctors in general, or just the NHS pensions. It is the teachers, the police, the fire-brigade, the civil servants and all British employees on the public payroll.

The City fat cats retire early because each year, year in, year out, however badly they perform, however badly they manage our pensions, they take a huge percentage cut. Maybe we could help the pension problem by putting a Harold Wilson style 90% tax on all January bonuses over, say, £100, 000. Heavens, £100,000 is a lot of money. It is the kind of money that those fat cat GPs earn. But just a minute, if those poor investment bankers could only take home £190,000 of their £1 million annual bonus, they might have to work on until they were 60, and that would never do, would it?

The Taxpayer’s Alliance shows its true ultra-right wing roots, and demeans itself, by clothing this important issue in an ad hominen attack on NHS workers.