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NHS workers face dramatic fall in income from Tory tax hike and UC cut

September 18, 2021 7:47 PM
By Lib Dems

NHS workers face a £940 hit to their incomes next year due to Conservative plans to increase national insurance to 13.25% and cut Universal Credit, analysis published by the Liberal Democrats has revealed.

The figures show that the 3% pay rise for NHS workers announced earlier this year will be more than wiped out by the combined impact of the tax hike and slashing of support to working households.

Liberal Democrat Leader Ed Davey said the government's proposals were a "slap in the face for our NHS heroes" and accused ministers of launching an "unfair tax raid on nurses and others on the frontline of the pandemic." He was speaking as the Liberal Democrats met for their Autumn Conference this weekend.

The research, conducted for the Liberal Democrats by the House of Commons Library, shows that a typical NHS worker on £19,330 who claims Universal Credit will see their net income fall by £941 in 2021/22, or almost £80 a month.

The 3% pay rise will be more than offset by the £1040 hit from the Universal Credit cut and £200 in additional national insurance contributions.

The figures are based on a typical NHS employee (Band 2 healthcare assistant with two or more years' experience), who is a single parent with two school-age children and renting an average two-bed private sector home.

Liberal Democrat Leader Ed Davey said:

"These figures show that many NHS workers will see their meagre pay rise wiped out by the Conservatives' heartless proposals.

"For a working parent with children struggling to make ends meet, the impact of this could be devastating.

"It is a slap in the face for our NHS heroes and all those working families who Boris Johnson is taking for granted.

"The Liberal Democrats will keep fighting this unfair tax raid on nurses and others on the frontline of the pandemic.

"The government must work with us and other opposition parties to find a long-term solution to the social care crisis, one which is fair, sustainable and doesn't disproportionately hit those on low incomes."

Here are the details:

For an NHS worker claiming UC, what will be the net effect of:

  • The 3% pay rise for NHS staff
  • The UC cut
  • The NI rise

The 2021/22 NHS Agenda for Change pay rates in England, incorporating the backdated 3% pay rise for this year, are set out here on the NHS website.

Many different scenarios could be devised to illustrate the interaction of the above points. One possible scenario is set out as follows:

Band 2 healthcare assistant with 2+ years' experience, single parent with two school-age children and renting a 2-bed private sector dwelling at the median Local Housing Allowance rate for England in 2021/22). Gross pay in 2021/22: before pay rise = £19,337; after pay rise = £19,918. Increase in gross pay: £581 (+3%). (sources: 2020/21 and 2021/22 NHS England pay scales).

The table below sets out the net effect of all of the above factors on this illustrative NHS employee, using 2021/22 values (assuming all impacts, including the NI rise and the UC cut, are applied throughout 2021/22 in the 'After' scenario).

The overall net effect is a reduction in income of £941.73 on an annualised basis. This is the result of the withdrawal of the UC uplift (worth £86.67 per month or £1,040.04 annualised) which more than offsets the increase in net earnings from the pay rise.