§ The Minister of State, Department of Health (Mr. John Hutton)I have agreed with my right hon. Friend the Chief Secretary to the Treasury that, from April 2003, the National Health Service pension scheme will assume its full liability for pensions increase costs. The change, which will bring the National Health Service into line with other public service schemes, will mean an increase in employer contributions from 7 to 14 per cent, of pay. Employee contributions will remain unchanged.
The additional costs will be fully covered by a transfer of funds into the Department of Health's departmental expenditure limit (DEL) baseline. This will be extra funding, on top of expenditure plans announced in the last Budget, and is included in the Chancellor's pre-Budget Report made yesterday. This means there will be no reduction in the resources already earmarked for healthcare.
Arrangements for increasing the employer contribution rate will be phased in with costs paid centrally from the Department's DEL in the first year. It is expected that employers will be charged the higher rate from April 2004.
A Departmental working group has been remitted to develop detailed implementation plans for handling the transfer. Alongside the financial arrangements for transferring and allocating resources, it will look at the human resource aspects of the change. This will include improving recognition of the full value of National Health Service pension scheme in recruitment, retention and return to service as well as the full costs of employment.
The new 14 per cent employer contribution rate is based on the Government actuary's emerging findings in his latest valuation of the National Health Service pension scheme. The Government actuary's report is expected to be published in the new year and copies will be placed in the Library.