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The big story: Counting the cost

7 March, 2018

The big story: Counting the cost

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Credit: iStock/Sarah Auld

At the time of writing, details of the new pay deal for Agenda for Change staff still hang in the balance, and questions remain around how the government will finance it.

In last year’s autumn budget, chancellor Philip Hammond signalled an end to the 1% pay cap. He promised that additional funding would be made available for a pay increase for Agenda for Change staff, provided that talks with unions ‘bear fruit’. But how likely is it that we will see the 3.9% rise the NHS unions are calling for, and where is the additional money likely to come from?

It’s clear that there is a pressing need to take decisive action on pay, says Adam Roberts, chief economist at the Health Foundation, an independent health policy charity. ‘NHS pay has been falling substantially – by around 6% between 2010 and 2015 – although it didn’t fall as much as in the private sector during this period. 

‘However, since 2015, pay for health and care workers has risen slightly but stayed broadly flat, while there has been bounce-back in other sectors,’ Adam continues. ‘Suddenly you have a situation where pay is continuing to fall relative to other areas of work, so this is adding to the high vacancy rate and difficulties in recruitment, and has implications for people deciding whether to embark on a career in healthcare.’

Making up for lost pay

At the time of writing, it’s difficult to predict how generous the promised pay settlement will be. If the government agrees to the 3.9% pay rise, plus the £800 to make up for lost pay during the years of austerity, it’s estimated that this will cost in the region of £2bn. 

‘I would expect there to be an increase above the current 1% cap, with additional money made available from the Treasury to fund this,’ says Adam. ‘It’s hard to say whether the 3.9% would be realistic or not. It’s a lot higher than the historic growth in wages which, across the economy, tend to rise by around 2% above the rate of inflation, so there would be a significant element of catch-up pay involved.’

Many strings attached?

Whatever the figure, it’s crucial that any increase in pay is fully funded by HM Treasury and doesn’t come out of the current NHS budget, says Jon Skewes, RCM director for policy, employment relations and communications. 

‘It is beyond the capabilities of the NHS to absorb more costs and, without additional funding, it would be impossible for it to take place,’ he says. ‘It would threaten services and jobs, and put the NHS in an even worse position than it is in now.’ But if the Treasury does release the cash, it means the government will have the tricky task of shaving up to £2bn off other public spending budgets, such as housing and education. The alternative is to add it to borrowing, thus increasing the deficit.

It seems likely that any pay rise, particularly if substantial, will come with some strings attached. For example, increased productivity might be expected, but this is something that the NHS has been striving towards for some time, says Adam. ‘Productivity in the economy as a whole is quite low, less than 0.5% a year, while NHS productivity is close to 1.5%. Further savings can be made, but it’s very clear that the NHS is improving its efficiency and exceeding the general trend, which is very difficult for a health service because it is so people-led.’ 

The government may also be looking to change the system of pay increments for career progression. In an interview with the Health Service Journal last year, health secretary Jeremy Hunt said he wanted to move towards ‘more professional pay structures’, giving rise to fears that some of the money will be raised through tinkering with the current system. On this, the RCM is clear that it is unacceptable to expect midwives and other NHS staff to help fund their own pay increase through changes to their terms and conditions, and it is calling for funding to be made available for a proper review of pay structures.

Whatever the finer details, the government needs to make a significant move on NHS pay, says Jon. ‘The evidence that we have set out for the NHS Pay Review Body in my view presents an irrefutable case – but the question is, will they accept it?’

Fast facts

£6072 is the annual cost to send a child under two to nursery part-time (25 hours per week) according to the Family and Childcare Trust’s Childcare survey 2016. Midwives find it hard to afford childcare on their salary.

£1m+ was spent on agency, bank and overtime in maternity by 26 separate organisations. Of these, 24 were in England, one was in Scotland and one in Northern Ireland. 

£20.9m was spent on agency staff in maternity services in the UK in 2016. The average spend per hour on agency staff was £43.65.

£8.9m was spent on overtime in maternity services in the UK in 2016. The average spend per hour on overtime was £31.09.

£67.4m was spent on bank staff by maternity services in the UK in 2016. The average spend per hour on bank staff was £28.16.

(RCM, 2017)

References

RCM. (2017) Evidence to the NHS Pay Review Body. See: https://www.rcm.org.uk/sites/default/files/Evidence%20to%20the%20NHS%20Pay%20Review%20Body%202017%20A4%2056pp_2FINAL.pdf (accessed 15 February 2018).

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