Would a 35% pay uplift for junior doctors cost £1 billion or £2 billion?

Amid the ongoing dispute between the Government and junior doctors over pay, there have been a number of competing claims about how much a 35% pay uplift would cost.

The British Medical Association (BMA) has claimed that between 2008/09 and 2021/22 junior doctors had a 26% real-terms pay cut factoring in RPI inflation, and would need a 35% uplift to reverse this. We have written about these figures before.

Last month during a debate on the strikes, Labour MP Richard Burgon told Parliament: “Restoring their [junior doctors’] pay would cost around £1 billion a year.”

But health secretary Steve Barclay told MPs in reply that “the cost would be £2 billion, not £1 billion as he says”.

When Full Fact contacted Mr Burgon, his office told us that his figure was based on calculations published by the BMA. Dr Philip Banfield, chair of the BMA council, also used the £1 billion figure on the BBC’s Today programme on 20 April.

The Department of Health and Social Care (DHSC) gave us some information about the £2 billion figure used by Mr Barclay, but has not published its calculations.

Both figures are missing important context. The BMA’s estimate is for the net cost of pay restoration—which tries to take into account how much income tax and National Insurance  the Treasury would receive from the rise, and gives an indication of what the overall impact on public finances would be. The Government is talking about the gross cost, which is how much the uplift would add to the NHS wage bill.

The Institute for Fiscal Studies (IFS) told Full Fact that there is no single “correct” figure to use because both answer different questions.

It’s essential that all sides use accurate information and describe their figures clearly when talking about pay, so that the public can understand the facts about what people earn, what unions are asking for and how much a pay uplift might cost.

How were the figures calculated?

The BMA has estimated that the gross cost of a 35% pay uplift would be £1.65 billion, but the net cost would be £1.03 billion.

We haven’t replicated its figures in full, but the doctors’ union says it used NHS Digital’s staff earnings data for England for the year to March 2022 to calculate each grade of junior doctors’ mean annual earnings by headcount—with specialty registrar, core training, foundation doctor year 2 and foundation doctor year 1 taken as junior doctor grades. The BMA says it then uplifted each staff group’s mean annual earnings by the 35.3% pay restoration value, and applied additional employer National Insurance payment costs and pension contributions.

It then combined these with the monthly headcount staff workforce numbers to calculate a total earnings figure for each staff group, and added them together to come to its gross cost estimate of £1.65 billion.

To get the net cost (the figure quoted by Mr Burgon), the BMA said it calculated the amount of tax (income tax and employee national insurance) on the restored salary for each junior doctor staff group.

It added: “The additional tax contributed by each staff group is calculated as the difference between the income tax and national insurance under current salary and the income tax and national insurance under the restored salary.”

The union estimates that the Treasury would receive around £620 million back largely from the additional income tax and employee National Insurance junior doctors would pay. This would reduce the net cost to £1.03 billion.

Meanwhile, the DHSC told us that the total cost would be “over £2 billion”, slightly different from Mr Barclay’s statement that “the cost would be £2 billion”.

It said its estimate is based on the additional cost of a 35.3% uplift from the 2021/22 pay scales on top of the existing 2022/23 award for junior doctors. 

It told us that the uplift was applied to the expected average workforce in 2022/23 and included employer National Insurance and employer pension contributions.

However, the DHSC has not published its calculations, so it is not possible to see all its assumptions on expected workforce numbers or what National Insurance contributions would be, nor what its exact gross cost figure actually is.

The department also told us that its estimate was for junior doctors working in hospital settings only, and the cost including junior doctors working in GP settings would be higher. Junior doctors working in primary care are not included in the NHS Digital data sets used by the BMA, so do not appear to be factored into its estimates either. 

Why are the gross estimates different?

It is not clear why there is a significant difference between the DHSC’s gross cost total and the BMA’s, in part because the Government has not set out exactly what figures it used. 

The Nuffield Trust think tank has also calculated the gross cost of junior doctor pay restoration using a slightly different method, and provided these figures to Full Fact. It used the consolidated NHS provider accounts for 2021/22 to get a total salaries and wages bill, instead of the NHS Digital staff earnings estimates used by the BMA. The think tank also applied the 2% pay increase for 2022/23 and the impact of a 4% rise in junior doctor numbers to its sums.

Doing this, the Nuffield Trust estimated the gross cost of pay restoration for hospital and community health service junior doctors would be £1.81 billion excluding temporary staff, or £1.86 billion including them.

If the Government used a similar method, this might explain at least some of the discrepancy between the different gross totals.

Ben Zaranko, senior research economist at the IFS, told us that there is no single "correct" answer for how much a given pay rise for doctors would cost. 

He added: “It depends on the precise question: if we're interested in the amount by which the NHS pay bill would increase, and the funding pressures that would impose on providers, then the gross cost is the appropriate number.

“If we're interested in the ultimate impact on the public finances, we should use the net cost, net of the taxes that would flow back. 

“Both are useful and valid, but answer different questions.”

Image courtesy of Natanael Melchor