Comment / NAO: pay deal did not raise costs

Agenda for Change (AFC) has not added significantly to the NHS pay bill but it is unclear whether the new pay system has improved productivity as no central monitoring was put in place, according to the National Audit Office.

In NHS pay modernisation: Agenda for Change, published at the end of January, the NAO said the single pay system had simplified negotiations and made it easier to estimate staff costs and monitor budgets.

The Department of Health does not believe that it is possible to isolate the total cost of AFC from the pay bill. However, the NAO estimated the impact in each of the years from 2003/04 and 2007/08 by comparing the actual pay bill with what it might have been had AFC not been implemented.

In one scenario in 2007/08 AFC added £166m to the bill, while in the other it saved £239m. The watchdog said the variation was small compared with the actual pay bill of £28bn.

Gill Bellord, NHS Employers’ director of pay, pensions and employment relations, said: ‘The differences between the models are small if compared to the total pay bill and the midpoint of this range of costs would suggest Agenda for Change has delivered savings for the NHS.’

The Department had predicted AFC would save £1.3bn by 2008/09 and productivity would improve. But the NAO said the Department had failed to set up central monitoring arrangements to show how the pay system had affected productivity.

Productivity for the NHS as a whole was the only measure available and this had continued to fall when AFC was introduced, although this had slowed recently.

NAO head Tim Burr praised the NHS for transferring 1.1 million employees to the new system. But he added: ‘The benefits that should have come with this new simpler system, such as more effective working, have not been wholly achieved.’