How inflation has downsized your payBMJ 2011; 342 doi: https://doi.org/10.1136/bmj.d3473 (Published 10 June 2011) Cite this as: BMJ 2011;342:d3473
Inflation in the United Kingdom has been creeping up, yet doctors’ salaries haven’t kept pace. Helen Jaques looks at exactly how much doctors have lost out thanks to pay lagging behind inflation
Doctors have for some time been complaining about how their pay is being cut, although rather than actual decreases in salaries the issue is usually with “real terms” pay cuts. In pure numerical terms doctors’ pay has barely changed over the past few years, they argue, but the cost of living has increased with inflation, effectively reducing what their money can buy and making it worth less. But is this really the case?
Figures from the NHS Information Centre show that doctors have been receiving below inflation pay rises since 2007.12 In the 2007-8 pay round, for example, consultants got a pay rise of £1000, which amounted to a 1.4% increase. According to the Office for National Statistics, inflation as measured by the consumer prices index (CPI)—an internationally comparable measure of inflation used by the government for its UK inflation target and, since April 2011, to index benefits, tax credits, and pension3—increased by 2.3% during this period,4 meaning that doctors in effect took a 0.9% pay cut that year. By 2009-10 doctors were still receiving only a 1.5% pay rise, while inflation for this period was 2.2%.
Calculations show that doctors’ actual salaries over the past three years would be up to £10 000 higher had they risen with inflation. Foundation year 2 doctors have effectively lost six months’ rent as a result of stalling pay, whereas general practitioners (GPs) have missed out on enough to buy a new car. Here we outline how various grades of doctors have lost out thanks to below inflation salary rises.
General practitioners have fared particularly badly when it comes to pay over the past three years, as their earnings have not only suffered from below inflation pay increases but have actually decreased. Some groups of GPs would be almost £10 000 better off if their average earnings before tax had increased with CPI.
Contractor GPs working under either a general medical services (GMS) or a personal medical services (PMS) contract had average earnings before tax of £107 667 in 2006-7, which had decreased by £2367 to £105 300 in 2008-9.1
Had their average earnings in 2006-7 increased each year with inflation according to CPI, GPs in the UK would have been earning on average £112 677 in 2008-9—meaning that they lost out on £7377 during this period.
Before April 2011 a different measure of inflation, the retail prices index (RPI), which includes housing costs and mortgage interest payments, was used to index benefits, tax credits, and pensions.5 If RPI is used as a measure of inflation instead of CPI, GPs would have been on £112 969 in 2008-9, £7669 more than their actual take home pay (fig 1⇓).6
Things get worse once you break these figures down by contract type. GPs on a general medical services contract had average earnings before tax of £103 530 in 2006-7, compared with £118 499 for GPs on a personal medical services contract. However, by 2008-9 both groups had seen their average earnings drop, by £4330 for general medical services GPs and £2199 for personal medical services GPs.
If 2006-7 earnings for GPs on a general medical services contract had increased with the CPI measure of inflation, GPs would have been taking home £108 347 in 2008-9, a difference of £9147. Personal medical services GPs would have been on £124 013 in 2008-9, £7713 more than what they actually earned that tax year.
On top of all this, the proportion of gross earnings taken up by expenses (expenses to earnings ratio) has increased for contractor GPs, from 56.5% in 2006-7 to 59.3% in 2008-9. This effectively means that GPs have experienced an inflation double whammy—their earnings haven’t increased with inflation, but the cost of the goods and services that make up their expenses has.
“These figures will come as little surprise to doctors,” said Kate Bullen, deputy chair of the BMA Council. “GPs and consultants have grown used to sub-inflationary pay awards, and GPs, who have seen their practice income frozen while their expenses have risen, have actually had pay cuts. Doctors understand the difficulty of the economic climate at the moment and just want to be treated fairly, in the same manner as other public sector workers.”
Junior doctors have also had below inflation pay rises since 2007. In 2007-8, junior doctors got a pay award of 1.5%, whereas CPI inflation that year was 2.3%. Similarly, in 2009-10 junior doctors still got pay award of only 1.5%, whereas CPI inflation was 2.2%, an effective pay cut of 0.7%.
Foundation doctors and specialty trainees would be almost £1500 richer, equivalent to three months’ rent in many parts of the UK, if their mean basic salary per full time equivalent had increased each year with CPI. As a group, junior doctors’ mean basic salary increased from £29 250 to £30 167 between 2007-8 and 2010, whereas it would have increased to £31 682 had it kept track with CPI inflation over this period (fig 2⇓).
Foundation year 1 doctors’ mean basic salary per full time equivalent increased by £1250 between 2007-8 and 2010, from £21 350 to £22 600.2 Had it increased with inflation according to CPI it would have gone up by £1775 to £23 125 at the end of 2010, £525 more than they actually took home that year.
Foundation year 2 doctors saw their basic salary decrease by £325 between 2007-8 and 2010, from £29 525 to £29 200. If their basic salary in 2007 had increased each year with inflation they would have been earning £31 980 at the end of 2010, £2780 more than what they were actually paid.
The mean basic salary per full time equivalent for registrars went from £36 875 in 2007-8 to £38 700 at the end of 2010, but they would have been on £39 941 at the end of 2010 if their basic salary had increased each year with inflation, a difference of £1241.
“These figures hammer home the exact detriment junior doctors are facing financially, exacerbated by the steady increase in student debt that newly qualified graduates inherit,” said Shree Datta, co-chair of the BMA’s Junior Doctors Committee.
“At a time when the NHS faces one of the biggest upheavals in its history, valuing and engaging staff has never been more critical,” she adds. “Given that pay over the rest of the public sector, and in the private sector, has increased by approximately 2% over this period, it is difficult to justify the significantly lower increases for the most junior doctors. One potential outcome could be an adverse impact on recruitment and retention of doctors.”
It is worth noting, however, the difference between mean basic pay and mean total earnings for junior doctors. Mean total earnings—which includes basic salary plus hours related pay, overtime, occupation payments, location payments, and other payments such as redundancy pay or payment of notice periods—was £13 622 more than mean basic pay in the last three quarters of 2010, meaning that junior doctors earned on average £43 789 for that period, compared with the average basic pay of £30 167. Although this suggests junior doctors are better off than first appears, this “top up” can vary wildly between individuals, and the BMA maintains that it is not appropriate for doctors to have to work overtime or unsocial hours to maintain a decent salary.
Consultants were unfortunate enough to be subject to a pay freeze before doctors in other grades, receiving a 0% pay rise in 2010-11 as well as the two year pay freeze imposed on the whole public sector between 2011 and 2013.7
Consultants on the new contract, introduced in 2003, had a mean basic salary per full time equivalent of £85 475 in 2007-8, which increased to £90 133 in the last quarter of 2010. Had their basic salary in 2007 increased each year with inflation according to CPI, they would be on £92 582 at the end of 2010, £2448 more than they actually received that year.
Consultants on the old contract had a mean basic salary per full time equivalent of £83 100 in 2007-8, which had increased to £86 300 by the end of 2010. If their basic salary in 2007 had increased each year with inflation, they would be earning £90 009 at the end of 2010, a difference of £3709 (fig 3⇓).
“Consultant pay has been falling behind inflation so that any improvement in consultant pay as a result of the new contract in 2003 has effectively been cancelled out,” confirms Paul Flynn, deputy chairman of the BMA’s Central Consultants and Specialists Committee.
Dr Flynn does point out that consultants’ basic pay differs considerably from their average total earnings thanks to the additional money earned by doing extra programmed activities and from overtime or out of hours work. “But even if you look at what people’s average total remuneration is, which takes into account all sorts of things, it’s still not kept pace with inflation,” he said.
“Consultants are looking at what they’re earning becoming less and less valuable as time goes on, and that leads to a sense of not being valued, and once people start feeling that they’re not being valued for the work that they do it can be very hard to keep up morale and keep going through what is a difficult job,” he adds. Add on to this changes in pension taxation and potentially to the NHS pension scheme itself, and people begin to feel that they’re not valued and “start thinking about the exits,” says Dr Flynn.
Associate specialists by comparison have done quite well on the pay front over the past few years, thanks largely to the new associate specialist and specialty doctor contract negotiated in 2008.
Associate specialists who moved on to the new contract in 2008 had a mean basic salary per full time equivalent of £72 000 in 2007-8, which increased to £77 967 by the end of 2010. Had their basic salary in 2007 increased each year with inflation according to CPI, they would have been on £77 986 at the end of 2010, a difference of only £20. But if their basic salary in 2007 had increased each year with inflation according to RPI, they would be earning £77 709, £257 less than what they actually took home in 2010.
Bill McMillan, head of medical pay and workforce at NHS Employers, contends that both employers and doctors are happy with doctors’ pay. “Employers believe that wages in all doctor groups are appropriate and reward them for the skilled and valued work they perform,” he said. “The latest NHS staff survey indicates that doctors themselves are significantly more likely to be satisfied or very satisfied with their pay than other occupational group in the NHS.”
And you could argue that everyone, not just doctors, has seen their pay stall as a result of the financial crisis. But in the year to March 2011, pay growth (excluding bonuses) stood at 1.9% in the private sector and 2.5% in the public sector as a whole,8 whereas consultants got a 0% pay rise, foundation doctors were awarded 1.5%, and registrars, specialty doctors, and associate specialists 1%. Inflation for 2010 was 3.3%. “It’s extremely galling to consultants that we who were in no way to blame for the financial crisis are watching the pay of those in the private sector, who must take some of the blame for it, carrying on rising, whereas ours has in real terms been falling,” argues Dr Flynn.
And inflation figures are set to get a whole lot worse. Inflation was 4.5% for April 2011—its highest since September 2008, when it stood at 5.2%, the record high for CPI.9 Inflation is expected to surpass the levels forecast in the government’s spending review last October, so that Department of Health funding will drop by £857m in real terms next year and £910m by 2014-15.10
Given that doctors are guaranteed a 0% pay rise for the next two years thanks to the freeze on public sector pay and could be facing a freeze on incremental pay increases too,711 the future doesn’t look bright.
Competing interests: None declared.