Ending pay cap not as costly as thought, claims IPPR
NHS workers have experienced a seven-year pay squeeze with a two-year freeze from 2011/12 followed by five years of a 1% pay cap. According to the IPPR, this has eroded pay in real terms, with a band 5 nurse today effectively receiving £3,214 or 10% less than they did for the same role in 2010/11 when you take account of inflation.
There have been increasing protests about the continuation of the cap, and the government has recently announced the cap will end from 2018/19. The IPPR report – Lifting the cap – looked at two scenarios for increasing pay.
It identifies the initial additional cost per year in 2019/20 of uprating the NHS pay bill in line with CPI from 2018/19 as £1.8bn. But it says the cost would drop to just over £1bn once higher receipts from income tax, national insurance and lower means-tested welfare payments.
However the increase would also help boost growth in gross domestic product, leading to additional tax receipts of just under £100m – giving a final cost to the government of £950m.
The think tank also looked at the impact of uprating pay scales in line with public sector earnings plus 1% a year – an approach that would reverse the real terms pay cuts in recent years. While this ‘catch-up’ scenario would have a headline cost of £3.9bn, the think tank said the final cost to the government would be £2.1bn.
The report recommended an end to the pay cap with ‘significant real terms increases for NHS worker in 2018/19 and 2019/20’. These should be made alongside differential increases in pay areas facing particular recruitment and retention challenges. The report said the government to provide additional funding in its autumn Budget to cover the increased cost of higher pay. And it called for a new workforce strategy to be developed with NHS employers and trade unions.
This new strategy should review the potential impact of Brexit on the workforce and the impact on recruitment of scrapping NHS bursaries.
NHS Providers welcomed the report. ‘The report rightly points out that when assessing the cost of lifting the pay cap, we need to review the total impact for the Treasury and wider economy not just the headline cost associated,’ said head of analysis Phillippa Hentsch.
She also agreed with the report’s call for additional funding to cover the cost of ending pay restraint. ‘Trust budgets are already over-stretched,’ she said. ‘There is not currently sufficient funding to finance further pay rises, when the NHS faces so many other pressing demands.’
The Royal College of Nursing said the report ‘unpicks the government’s argument’ on the costliness of allowing NHS pay to keep pace with inflation. ‘Not only is it fair on nursing staff,’ said RCN chief executive Janet Davies, ‘the Chancellor is left in no doubt how he and the Treasury benefit – increasing pay leads to economic growth.’
NHS Employers has already called for additional investment to support pay awards above the current cap. But it has also pointed out that other action is also needed to improve supply and retention of staff.
There have been increasing protests about the continuation of the cap, and the government has recently announced the cap will end from 2018/19. The IPPR report – Lifting the cap – looked at two scenarios for increasing pay.
It identifies the initial additional cost per year in 2019/20 of uprating the NHS pay bill in line with CPI from 2018/19 as £1.8bn. But it says the cost would drop to just over £1bn once higher receipts from income tax, national insurance and lower means-tested welfare payments.
However the increase would also help boost growth in gross domestic product, leading to additional tax receipts of just under £100m – giving a final cost to the government of £950m.
The think tank also looked at the impact of uprating pay scales in line with public sector earnings plus 1% a year – an approach that would reverse the real terms pay cuts in recent years. While this ‘catch-up’ scenario would have a headline cost of £3.9bn, the think tank said the final cost to the government would be £2.1bn.
The report recommended an end to the pay cap with ‘significant real terms increases for NHS worker in 2018/19 and 2019/20’. These should be made alongside differential increases in pay areas facing particular recruitment and retention challenges. The report said the government to provide additional funding in its autumn Budget to cover the increased cost of higher pay. And it called for a new workforce strategy to be developed with NHS employers and trade unions.
This new strategy should review the potential impact of Brexit on the workforce and the impact on recruitment of scrapping NHS bursaries.
NHS Providers welcomed the report. ‘The report rightly points out that when assessing the cost of lifting the pay cap, we need to review the total impact for the Treasury and wider economy not just the headline cost associated,’ said head of analysis Phillippa Hentsch.
She also agreed with the report’s call for additional funding to cover the cost of ending pay restraint. ‘Trust budgets are already over-stretched,’ she said. ‘There is not currently sufficient funding to finance further pay rises, when the NHS faces so many other pressing demands.’
The Royal College of Nursing said the report ‘unpicks the government’s argument’ on the costliness of allowing NHS pay to keep pace with inflation. ‘Not only is it fair on nursing staff,’ said RCN chief executive Janet Davies, ‘the Chancellor is left in no doubt how he and the Treasury benefit – increasing pay leads to economic growth.’
NHS Employers has already called for additional investment to support pay awards above the current cap. But it has also pointed out that other action is also needed to improve supply and retention of staff.
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