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Government should cover cost of pay rise rather than ‘overstretched’ NHS trusts, says leading think tank

Institute for Public Policy Research report says government would recoup almost half the cost of lifting the pay cap for NHS staff through higher tax receipts and lower welfare payments.
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The government would recoup nearly half the cost of lifting the pay cap for NHS staff through higher tax receipts and lower welfare payments, a think tank has said.

The cost of increasing health service pay in line with inflation (2.9%) would be 1.8 billion per year by 2019-20, analysis by the Institute for Public Policy Research (IPPR) found.

But the actual cost would reduce to about 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.

Lifting the Cap report

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.

The government would recoup nearly half the cost of lifting the pay cap for NHS staff through higher tax receipts and lower welfare payments, a think tank has said.


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The cost of increasing health service pay in line with inflation (2.9%) would be £1.8 billion per year by 2019-20, analysis by the Institute for Public Policy Research (IPPR) found.

But the actual cost would reduce to about £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.

Lifting the Cap report

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.

The report says the government should cover any pay rise rather than ‘overstretched’ NHS trusts.

It comes just weeks after health secretary Jeremy Hunt told Parliament the pay cap had been scrapped.

‘This [pay restraint] has significantly eroded the value of pay in the NHS,’ it reads.

‘Pay for a band 5 nurse is £3,214 lower in real terms today than in 2010-11.

‘The NHS is facing growing challenges with recruitment and retention, with the number of nursing vacancies doubling in three years, and the number of NHS nurses in England falling for the first time in four years.’

‘Allocate appropriate funding’

RCN general secretary Janet Davies said: ‘This analysis unpicks the government’s argument on the costliness of allowing NHS pay to keep pace with inflation.

‘Not only it is fair on nursing staff, the chancellor is left in no doubt how he and the Treasury benefit.

‘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.’

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