Review of the reimbursement of travel expenses
Working in partnership as a sub-group of the NHS Staff Council, the Council’s
mileage sub group – which has both employer and trades union representatives has been reviewing the allowances paid to staff who use their own vehicles on official
business.
The review aimed to deliver a national system for reimbursements which meets the
needs of staff, employers and the service in line with principles for any new
arrangements: fair to staff, easy to use and transparent, with built-in partnership
reviews of allowances, to ensure they cover costs incurred.
This briefing gives employers and staff information about the NHS Staff Council’s
proposals for a new system of reimbursement of travel expenses. The document
contains:
-
a description of the proposed new system of reimbursing travel costs; and
-
background information about mileage allowances and the review (see annexes).
Current arrangements
The NHS has a responsibility to reimburse costs incurred by staff who use their own
vehicles to travel on NHS business. The national rates of reimbursement currently in
the Handbook were last uprated in July 2008 in response to rapid increases in fuel
prices at that time. Subsequently fuel prices and other motoring costs have
changed. However, the NHS Staff Council has no agreed way of measuring these
changes and, therefore, of checking if rates of reimbursement have kept track with
changes in costs.
Yet it is essential that nationally agreed rates appropriately reimburse staff for the
costs they incur when they use their own vehicles for work purposes.
The current arrangements are set out in Section 17 and Annex L and Annex M of the
NHS terms and conditions of service handbook.
What is being proposed - overview?
The proposals have been developed following a consultation with NHS employers
and trades unions which indicated a preference for a single rate of reimbursement
and use of the AA guides as the reference for the costs of business motoring for the
NHS. The sub-group believes this will ensure an authoritative and independent point
of reference that reflects the true cost of motoring.
From 1 July 2013 we are proposing a system of reimbursement of the cost of miles
travelled on NHS business to replace the existing system of payments and
allowances. In keeping with the principles we have agreed we are proposing a
simpler system based on a standard rate of reimbursement up to a maximum annual
mileage after which the rate changes. The distinction between “regular” and
“standard” car users would be abolished and there would be no reference to engine
size. All travellers, irrespective of the frequency of their journeys and the vehicle they
drive, would receive the same rate of reimbursement. There would be a separate
rate of reimbursement for motorcycle and bicycle users.
Feedback from the consultation exercise indicated that staff and managers regarded
certain allowances for carrying passengers and heavy and/or bulky equipment as
important and we propose that these should continue to be part of the new system of
reimbursement.
We recognise that it is necessary to ensure that the “average” car user is
appropriately reimbursed. It is not possible to have a national system that reflects
each individuals costs or personal circumstances. The single rate will be set at a
figure that we believe, as accurately as possible, reflects the costs to the average car
user.
Our proposals, which are outlined in more detail on NHS Employers website, are
summarised below:

a single rate of reimbursement for all private car users, which would be
reviewed twice a year;

rates of reimbursement which will move in line with business motoring costs;

using independently sourced information on costs via the AA;

reimbursement based on the average costs of running a car in the AA’s
estimate of a
mid-range of price and size;

an increase in the rates for pedal cycle users;

rates for motor-cycle users to be 50 per cent of the proposed new standard
rate of reimbursement for vehicle users;

continuation of excess travel expenses for staff required to change base as a
result of organisational change;

any ‘local agreements’ will be honoured;

half of the value of interest on capital (money) which an individual may
otherwise invest if it had not been spent on the car (the cost of capital) is
taken into account in setting the standard rate of reimbursement;

a change of reimbursement rates triggered when a change in overall motoring
costs produces an increase or decrease above or below 5%;

a small increase in the allowance for carrying bulky and/or heavy equipment;

a payment of the full standard mileage rate when staff are required to attend
training courses or events away from their normal base;

a “reserve rate” of reimbursement to replace the Public Transport Rate (PTR)
which would be 50 per cent of the proposed new standard mileage rate;

elements which address concerns expressed by the Sustainable
Development Unit (SDU) and other organisations concerned with the “green
agenda”.
The rates of reimbursement which would apply if the proposed system were in use
today are in the Table below.
Proposed rates of reimbursement at 1 July 2010 costs
Column 1
Column 2
Column 3
Column 4
Type of
Annual mileage Annual mileage All eligible miles
vehicle/allowance
up to 3,500 miles over 3,500 miles travelled
(standard rate) (standard rate) (see paragraph
17.15 and Table
9)
Car (all types of fuel) 54 pence per
18 pence per
mile
mile
Motor cycle
27 pence per mile
Pedal cycle
20 pence per mile
Passenger allowance
5 pence per mile
Reserve rate
27 pence per mile
Carrying heavy or
bulky equipment
3 pence per mile
These proposed rates and the proposed new qualifying conditions would apply to all
journeys made on and after 1 July 2013. There would be no changes to mileage
allowances and the qualifying conditions in the national Handbook before then.
Proposals in more detail
Our proposals include a new system for working out what the costs of business
motoring are. This is set out in the proposed new Annex L which would be
incorporated into the revised terms and conditions of service handbook. Annex L
shows how the list of costs in the AA guides would be taken into account in setting
the standard rate of reimbursement.
On-gong review of mileage rates
We are proposing that the new standard rate of reimbursement should be reviewed
twice each year:

the first review would take place as soon as possible after the publication of
the new AA guides (normally in April or May). The new values of the cost
items listed in the guides would be used to update the values in Table 22 in
Annex L and the change in the standard rate produced would be compared to
its value at the time the standard rate was last changed. A change in the
standard rate of more than, up or down, would lead to rates being adjusted for
mileage undertaken from the following 1 July;

a second review in October would look specifically at the average fuel price
in the twelve month period ending in October. A change in the standard rate
after this review would depend on the same rules as for the April/May review
and would apply from the following 1 January.
During the period leading up to the implementation of the new Section 17, Annex L
and Annex M on 1 July 2013, the NHS Staff Council would check the rates of
reimbursement being proposed using the procedures for review set out in the
proposals. Any changes to the proposed standard and related rates of
reimbursement resulting from these reviews, would be published in pay circulars so
that local partnerships could keep track of changes in the proposed new rates of
reimbursement until they are implemented on 1 July 2013.
The rates implemented on 1 July 2013, would be those resulting from the review
which would be done following the publication of the new AA guides in April/May
2013. Those rates would apply to all journeys undertaken on and after 1 July 2013.
Calculating the cost of fuel
It is the cost of fuel that is often the trigger for concerns over reimbursement for
business travel. However, the AA estimates that the biggest single cost item is
depreciation, which is a “standing cost”, rather than a “running cost”.
All items in the AA’s list of motoring costs are calculated in terms of their cost per
mile travelled. Under the proposed new arrangements, the cost of fuel is calculated
this way, referenced to the average cost over the last twelve months. An example of
how this works is below.
Using Table 22, we have assumed a total of 10,000 miles of motoring each year,
standing charges of around £3,845 per year, which produce a cost per mile for
business miles travelled of around 38 pence. In this example the average cost of fuel
in a twelve month period is 105 pence per litre and produces a cost per mile of 11.8
pence for fuel only.
Reserve rate
We are proposing that there should be a reserve rate of reimbursement to replace
the existing public transport rate (PTR). The reserve rate would be used to assist
with the cost of journeys made in specific circumstances (see below). The reserve
rate would be set at half of the standard rate (currently this would be 3 pence per
mile above the current “public transport” rate) and the reserve rate would move up
and down, in line with the standard rate.
The reserve rate would be used to reimburse travel when:
- an employee unreasonably declines the employers’ offer of a lease vehicle
(see the proposed new Annex M);
- employees are required to return to work or work overtime, in line with
Section 3 of the NHS terms and conditions of service handbook, on any
day and incur additional travel to work expenses on that day;
- a claim for excess mileage is made in situations where there is a
compulsory change of base, either permanent or temporary, resulting in
extra daily travelling expenses;
- an employee uses his or her own vehicle when suitable public transport is
available and appropriate in the circumstances.
Lease cars
Some principles are described in Annex M in the NHS terms and conditions of
service handbook and in the relevant texts of national conditions for doctors and
dentists. The details of arrangements for lease car users are agreed by partnerships
locally and are part of local “green” transport planning.
The environmental agenda (the “green” agenda)
We have reviewed the responsibilities the NHS has to ensure sustainable
development and carbon reduction. The achievement of the targets the NHS has
been set, depend on local partnerships implementing strategies which bring together
all the talents and expertise of the workforce.
The mileage sub-group has considered the green agenda in all of the options it has
considered. Directgov (http://campaigns.direct.gov.uk), the official Government
website for information on green transport issues has listed, in association with “What
Car”, the top rated fuel efficient ‘small family’ and ‘family’ cars. These fall into
£16,000 to £20,000 purchase price category in the AA guides to motoring costs,
which link to the range of rates being proposed.
For more information on the NHS carbon reduction strategy, see Saving carbon,
Improving Health: NHS Carbon Reduction Strategy for England at
http://www.sdu.nhs.uk/page.php?page_id=94 which was launched on 27 January by
the Department of Health
Timetable for implementation
We expect to be able to report on the results of trades union consultations when the
NHS Staff Council meets on 19 November. If there is a positive result we would aim
to publish amendments to the NHS Terms and Conditions of Service Handbook soon
after.
Existing rates of reimbursement would be frozen until 1 July 2013.
Annex 1
Background
Calculating reimbursements in the NHS
The national system of reimbursement of travel expenses was formerly the remit of
the General Whitley Council (GWC) and national rates of mileage allowances were
last fully reviewed in 2000. The uplift to rates applied in July 2008 is the first change
since then. Until 1993, rates were reviewed annually by reference to the estimates of
motoring costs produced by the Automobile Association Trust (AA). At that time AA
estimates of costs and the allowances in the old GWC Whitley handbook were all
based on engine size.
Mileage allowances and the wider mileage allowance policy were transposed from
the GWC arrangements to Agenda for Change, or were included in negotiations on
new contractual conditions for medical and dental staff. The arrangements, dating
back to the GWC/Whitley days, were copied into the new NHS terms and conditions
of service handbook and medical and dental terms and conditions.
In January 2008 it was recommended that local employers uplift some “standard
user” rates.
In July 2008, a 10 per cent increase to mileage allowances for all NHS staff was
agreed amidst rising fuel prices. That agreement was made in conjunction with a
commitment to continue talks in order to conclude the review of mileage allowances.
Consultation on proposed changes in 2009
In March 2009 we invited all local partnerships of employers and trades unions to
comment in partnership on proposed ideas for the main elements of a new system of
reimbursement. We received feedback from over 90 local partnerships via a
questionnaire. We received another nine responses in a more general format and
over 60 responses from individual staff. Detailed comments were also received from
the Sustainable Development Unit (SDU) the Energy Saving Trust (EST) and the
Procurement and Supplies Agency (PASA).
Over 90 per cent of the partnership responses indicated agreement with the general
approach suggested by the mileage sub-group. In particular, the responses
indicated a preference for a single rate of reimbursement and use of the AA guides
as the reference for the costs of business motoring.
Principles for agreeing new arrangements
The mileage sub-group believes that mileage allowances should be based on certain
core principles. These are:
- fairness: allowances should reflect the cost of using vehicles for work and should
be felt ’fair’ by car users;
- simplicity: the system should be easy to administer - allowing staff to make claims
easily and managers to deliver reimbursement quickly, and must be deliverable on
existing payroll systems;
- transparency: all staff and managers should be clear how mileage rates are
calculated and what the entitlements are, how they will be reviewed and how
changes will implemented;
- a partnership system: under the NHS Staff Council, for the regular review of
allowances based on the agreed measure.
The new system of reimbursement we are proposing is in line with the principles
outlined above.
Current system of allowances and payments
Currently the provisions in the national Handbook distinguish between standard and
regular users. Regular Users are those employees who are classified by their
employer as a regular car user and for whom their employer has deemed it
uneconomic, or is unable, to offer a lease car. To qualify for regular user rates of
reimbursement employees must satisfy the eligibility criteria in the national
Handbook. Employees who use their vehicles on NHS business and who are not
classified as regular users by their employer are classed as standard users. The
rates of reimbursement for regular and standard users are in Table 1 below.
Table 1
Table 1: Rates paid to standard and regular (vehicle?) users1 in the NHS.
Additional allowances
 Passenger allowances – 5 pence per mile.
 Public transport rate – 24 pence per mile
 Bicycle allowance – for local determination subject to a minimum of 10 pence
per mile
 Motorcycle allowance – dependant on cc and mileage (see Annex L of the
NHS terms and conditions of service handbook)
Annex 2
Standard methodologies for calculating the costs of motoring
The sub-group understands that recently the debate on mileage allowances has
become focussed on fuel costs. These are an important part of motoring costs and
changes in the cost of fuel should be reflected in the overall rate of reimbursement.
There are many other items contributing to the full costs of motoring for staff. For
example tax, insurance, depreciation, repair and MOT costs. The mileage sub-group
believes that only by taking account of all the costs involved, can we be sure that
staff are being appropriately reimbursed for the cost of their journeys on official
business.
The guides on motoring costs produced by the AA, have been the basis for the
calculation of national mileage allowances for many years. The guides set out in
detail the costs of running a car. We are proposing that the AA guides are the best
source of information on the costs of motoring and that they can be used to obtain
information to estimate the costs of business motoring. The guides are, we believe,
the best basis for calculating reimbursement for business travel because they provide
the facilities needed for the regular review of motoring costs, including those costs
like fuel which tend to change often.
The AA guides to motoring costs
Motoring costs tables are produced annually by the AA (normally in April or May) and
have been since 1960. Care needs to be taken with comparisons due to changes
that have taken place over the years, namely:



cars are more economical and safer;
today’s cars produce less than 2% of the emissions of earlier vehicles;
cars are quieter, easier to drive, more durable and reliable.
The AA figures are based on

how much it is likely to cost the average private user to run a petrol or diesel
powered car in the following purchase price categories:
Petrol





Up to £12000
£12000 to £16000
£16000 to £20000
£20000 to £30000
Over £30000
Diesel





Up to £12000
£12000 to £17000
£17000 to £20000
£20000 to £30000
Over £30000

the purchase price of a new car which is replaced after five years;

an analysis of the running costs of the 60 top-selling models representative of
the UK market.
Standing charges
Standing charges are defined as the costs of keeping the vehicle on the road, even if
it is not used. They include:





Road tax
Insurance
Cost of capital used – the interest on capital (money) which may otherwise
be invested if it had not been spent on the car
Loss of value – depreciation costs
Annual roadside breakdown cover.
The standing charges per mile can be calculated by dividing the standing charges by
the miles travelled per year.
Running costs
Running costs per mile relate directly to using the vehicle and include:




Petrol
Parking and tolls
Tyres
Servicing and repair costs.
The fuel cost element in the AA guides can be increased or reduced in line with fuel
price fluctuations.
1
Please refer to the Agenda for Change Terms and Conditions of Service, Section 17 for full
details of the definition of a regular user