Government considers cuts in £50m pensions fix

Thursday 27th June 2019

NHS boards and other areas of goverment face having their budgets revised as a result of a £50m dispute between the Scottish and UK governments over NHS pensions changes, can exclusively reveal.

In a letter to NHS bosses and finance directors, Health Secretary Jeane Freeman claims the UK Government’s late notice decision not to provide enough funding to cover the costs of additional NHS pension contributions is having a ‘significant and detrimental’ effect on the 2019-20 Scottish budget.

Ms Freeman says the Scottish Government is having an ‘unprecedented’ review of spending allocations just three months after the beginning of the financial year so it can ‘partially mitigate’ the shortfall.

In a brief statement, the Scottish Government says: "The money will come from the wider Scottish Government budget. The rules regarding pensions taxation are reserved to the UK Government and the Health Secretary has written to the Chancellor urging a quick resolution and an urgent review."

In 2018, the Treasury increased NHS employer contributions from 14.9% to 20.9% following a revaluation of public sector pension schemes.

It’s estimated this will cost the health service in Scotland £328.4m in 2019-20.

The UK Government is providing the full cost of the additional contributions to NHS employers south of the border but is said to have only contributed £280m to the Scottish Government.

Last week the Scottish Government announced it would provide nearly £50m to the health service to fill the pensions black hole. In a letter seen by, Jeane Freeman says this has added to ‘severe pressure’ on public services caused by austerity.

As a result, ministers are taking the ‘unprecedented’ step of reviewing this year’s Scottish budget to move cash from one portfolio to another.

Some changes in planned budgets across the Scottish Government will be necessary to redirect funding to at least partially mitigate the impact of the increased employer pension contributions, meet additional EU exit costs and ensure funding for other key priority areas,’ the letter states.

Ms Freeman says the Scottish Government had ‘repeatedly sought clarification on the detail of the settlement from the UK Government and the reasons for the shortfall in funding, but this has not been adequately provided.’