DPF Briefing

May 2001

Net Pay Deduction

Following the Edmund Davies Inquiry into HDP pay and conditions in 1978, government set up a separate inquiry by Eric Wright to look at all the non Home Department Police Forces. This resulted in the basic pensionable pay of MDP officers being set at 95% of HDP; prior to that it was 100%.

In 1982 things changed again. HDP were awarded a pay rise of 10.3% in line with the Edmund Davies formula, which at the time was much higher than pay rises for other public sector employees. The Home Secretary of the day decided to defuse criticism by increasing pension contributions by 4% to 11% in total, incidentally with no added benefits. This had the effect of making the net value of their pay award about 5.6%.

In the negotiations which ensued between DPF and Treasury the NPD was arrived at as a means of maintaining 95% basic pensionable pay and overtime calculations. It was a complicated formula, however it ensured that basic pensionable pay increased by 10.3%, thus maintaining 95% relativity and at the same time allowed for the same net pay increase of 5.6%.

This is where it gets slightly complicated.

The NPD was computed at 4.26% which represented the average difference between the 10.3% increase in pensionable pay and a 5.6% increase in net pay. Negotiations were conducted on the basis that NPD was taxable and it was reduced to take account of the tax liability (30% for ranks up to Chief Inspector and 40% for Superintendents). Therefore, the effective NPD was 2.982% and 2.556% respectively.

Following introduction of NPD there was a great deal of confusion over the tax issue which resulted in our Accountants seeking clarification from the Inland Revenue. The IR were in principle sympathetic to the contention that NPD was not a taxable receipt, however they noted a political point which had a bearing on the situation and that was the pay negotiations were conducted on the basis that NPD was taxable and that a small increase in actual pay had been agreed to compensate for the tax thereon. If DPF were to pursue the matter and it was established that the NPD was not taxable then this could have an adverse effect on future pay negotiations.

In reality this would have given the Treasury an opening to reduce the 95% relativity to possibly 92% or less. It was felt that on balance this would not be in the best interests of the membership to pursue.

The whole matter was placed before the 1984 Conference and delegates unanimously supported the recommendation to proceed no further.

This subject remains as controversial today as it was at the time it was introduced all those years ago.

There have been suggestions made that NDP should be used to fund AVC’s, private health insurance and so on. It is however important to remember that pay is centrally funded by the Exchequer. The NPD does not get siphoned off into a separate fund which can then be used to fund other projects.

Future discussions in the joint working party on pay and allowances will again look at ways of simplifying the NPD, but at the same time preserving our relativity.