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Report from the Treasurer

Dr David Pickersgill
Monday 28 June 2004

Download the slides as a powerpoint presentation (850 k) using the right hand menu.

Background Slide 1

Chairman, RB

I have great pleasure in presenting my report on the Associations’ finances and membership for the year 2003. I hope that all members of the RB will have had an opportunity to read the Accounts, but I shall be illustrating my talk with a number of PowerPoint slides for ease of reference. Firstly, I would like to discuss membership. Once again the overall number of members stands at an all-time record.

Slide 2

At the end of 2003 it was 128,500 and it has now risen to 129,638. However, the overall figure conceals a worrying trend which I mentioned last year, namely that our ability to recruit significant numbers of new members in certain crafts - medical students, SASC doctors, to name but two - remains less than satisfactory. We also have seen a small decrease in the percentage of the total number of doctors in other crafts who are choosing to join the Association.

Slide 3

In other words, our market share is declining. In order to address these concerns the Secretary has formed a Membership and Membership Services Development Forum, which has so far addressed the issues relating to recruitment and retention of medical students. The outcome of its work is to recommend to you that in 2004 all first-year medical students who join the Association and who sign a direct debit for their membership subscriptions in years two and three will receive free membership in their first year.

In addition, we have taken note of the comments made to us by representatives of the medical students and henceforth the services we offer to student members will be more specifically tailored to their needs at differing stages of their student career. In the coming year we are turning our attention to the recruitment and retention of junior doctors and also the services which we provide for retired doctors. I hope next year to be reporting to you on improvements in our offering to these groups of doctors and report on their subscription rates.

Turning now to the Accounts, perhaps the most significant financial event in 2003 was the injection of £10 million in cash into the Staff Pension Scheme. I referred to this in my report last year, but I need to explain to you how this is shown in the Accounts. Financial Reporting standards do not permit the BMA to account for this £10 million injection all in the 2003 Income and Expenditure Account. Instead it has to be spread over twelve years, this representing the estimated average length of time that the current members of the Scheme will remain in BMA employment. The figure of £832,000 referred to in Note 8b to the Accounts is only one-twelfth of the £10 million. The same amount will be included in the Accounts for each of the next eleven years.

Slide 4

This £10 million special contribution has reduced the funding deficit in the Scheme and, combined with an increase in the contributions paid by the Association from 19.6% to 25% of pensionable salaries at the beginning of 2004, we have now a more satisfactory and acceptable funding level for the Scheme. In order to protect the Association’s position in future years should we see a repeat of the steep decline in the value of equities in the period 2000 to 2002, the current Scheme was closed to new entrants in the autumn of last year and was replaced by a new Scheme which will offer a defined contribution scheme up to age 40 and a defined benefit scheme thereafter.

Another significant event last year was the ending in mid 2003 of the link between staff salary increases and the DDRB recommendations. Staff salaries are our single biggest item of expenditure, accounting for over 60% of the annual costs of the Secretariat. Previously we had no direct control over the annual salary increase. For example, the 9.5% increase awarded to doctors from April 2004 was also paid to BMA staff and publishing group staff which increased our annual cost base by £3 million.
Slide 5

This followed increases of 5.6% the previous year. After protracted negotiations between senior management and representatives of the staff, the staff agreed to a one-off payment to buy them out of the link at a one off cost to the Association of £0.5 million and to the introduction of a new means of assessing annual salary increases. The overall size of the increase will be determined by the Finance Committee each year and will obviously reflect what the Association can afford. We will be able to budget much more accurately for salary increases in the future.

Slide 6

Last year I referred to the widening gap between our income from membership subscriptions and the cost of providing membership services. This has risen to in excess of 25%, and a summary of this years budget shows how the this gap is funded by profits from the Publishing Group and from other activities such as income from property and our investments.

Slide 7

However, at a level of 25%, or in excess of £7 million per annum, we feel that we are over reliant on these other sources of income, some of which cannot be relied upon in the future. This is particularly true in relation to the surplus from our publishing activities.

Slide 8

Over the last twelve months the income from classified advertising has ceased growing. This slow-down will lead to a reduction in surplus in 2004. In order to close the £7 million gap we have been looking at a number of measures, some of which have already been put into place.

We are experimenting with more cost-effective ways of working for some of our staff, particularly in Regional Services, and we are examining similar measures for staff who are employed in our central offices.

We are encouraging much greater use of telephone-conferencing and video-conferencing for committee meetings, with the objective of reducing the number of committee days by 20% during the next two years. Our target is to reduce the funding gap to a more sustainable level of around 15% by 2006.

How is your money spent?

Slide 9

You can see that members’ services account for £37.5 million of expenditure and how that expenditure is broken down.

Slide10

Finally, turning to subscriptions, I would like first to draw your attention to the graph on the screen which emphasises that increases in subscription levels have fallen well behind the increases in doctors’ incomes over recent years. It would, of course, be an easy option for any Treasurer to simply increase subscriptions by the rate of inflation or less, and it would no doubt be a popular move.

However, as I have just stated, we have to reduce the funding gap and although by taking a number of measures to reduce expenditure we will achieve this in part, we must also look to increasing our income.

Therefore, we have decided that it would be appropriate to increase subscriptions by 7.5% this year – this is still 2% below what many doctors received as a result of the DDRB exercise.

This will, we believe, bring our subscription levels back to a more appropriate level. For those on the standard subscription rate, this represents an increase of approximately 50 pence per week. Having taken this step, and also having had an above inflation rise last year, I expect that next year the rise in subscriptions will be closer to inflation. I have already referred to our recommendation in relation to medical students, which is designed as a pilot scheme and, if successful, will be continued in future years.

I believe that membership subscriptions still offer very good value for money. We are continually improving the services we offer to members – in the last year we have introduced the Doctors for Doctors scheme to help those of our colleagues who have health problems which are affecting their ability to work, and we have also introduced askBMA, a service which enables members in certain parts of the country to receive routine advice from the BMA beyond normal office hours. This service will be rolled out nationwide in the very near future.

Chairman, I believe that the Association continues to enjoy good financial health.

Slide 11

Our reserves are at a satisfactory level not only to give us the security we need and fund any exceptional unforeseen and unbudgeted activity, but also to produce over £2 million of income each year. I and your Finance Committee will continue to be diligent in our stewardship of the Association’s financial affairs and, before closing, I would like to pay tribute to Leigh Whittingham, our Finance Director, and all the staff in the Finance Department who work extremely hard on our behalf throughout the year.