News / News analysis: We're not there yet

A year ago, chancellor George Osborne announced plans to cap public-sector pay rises at 1% when the current pay freeze ends. Despite this seemingly categorical announcement, evidence from both staff and employers suggests that they think there is room for manoeuvre.

Staff view the below-inflation proposal as derisory, particularly after two years in which they have received no cost of living rise. Employers, keen to hold down their single biggest item of expenditure, have lobbied for a further two-year freeze, as 60% of staff will be eligible to receive an increment in 2013.

The pay freeze in 2011/12 saved the NHS in England £850m, NHS chief executive Sir David Nicholson told the Commons health committee last month  – a significant chunk of the £5.8bn of efficiency savings delivered that year according to the Department of Health. Trusts took other measures to restrict their pay spending (see box), but few believe they have exhausted their options, particularly as they look beyond 2014/15 to the next spending review period, when the efficiency programme is likely to be of a similar magnitude.

Some have pinned their hopes on national talks on the future of agenda for change (AFC), the pay system for most NHS staff. The NHS Staff Council, which includes union and employer representation, has been discussing a number of changes for several months and in November the first puff of white smoke emanated from the negotiations.

The staff council put forward four proposals, on which the unions will consult their members and, if they are endorsed, will come into effect in England from 31 March 2013. There are currently no proposals from any of the devolved administrations to change terms and conditions in this way.

Under the proposals, there would be tighter controls on incremental pay progression. Individuals would have to demonstrate they have the necessary skills and competencies for their role and had delivered the required performance. Annually earned pay would be introduced for most senior staff in bands 8C, 8D and 9. They would have to demonstrate the appropriate level of performance – agreed locally – to receive the last two points in their band. Poor performance would result in the point being lost. Those already on one of these points when the agreement is implemented would not lose that point in future years.

Accelerated pay progression in preceptorship (band 5) would end, while sickness absence would be paid at basic salary level – it would no longer include allowances or payments linked to working patterns, such as unsocial hours payments. There is also proposed guidance on workforce re-profiling – changing the skill mix in a department – which includes protection for staff being redeployed into a lower pay grade.

The key question is how much the measures would save. The answer is not entirely obvious and NHS Employers is keen to play down the importance of savings as a reason for opening the negotiations.

The aim was to help AFC run more smoothly, it said. Indeed, a statement from the staff council did not directly address the potential for savings, instead referring to ‘unprecedented challenges’.

However, a clue to how much the measures could save can be found in the work of the South West Pay, Terms and Conditions Consortium (SWC), a group of 20 (now 19) trusts formed this year to examine ways to reduce pay bills. Earlier this year it said an average trust with an income of £220m and staff costs of £140m would save £350,000 a year – £100,00 on unsocial hours, £200,000 in performance-related increments and £50,000 in cashflow benefit from preceptorship changes.

NHS Employers director of employment relations and reward Gill Bellord said that significant progress has been made. ‘All parties recognise the value of partnership working and will continue to work together to ensure that national terms and conditions remain sustainable for the future, fit for purpose and fair to staff. We now look forward to a positive outcome to the trade union consultation.’

Speaking on behalf of the NHS trade unions, staff-side chair and Unison head of health Christina McAnea said: ‘The unions' main objective is to defend and maintain a national terms and conditions agreement that can deliver for patients, staff and employers. We hope that this will enable trusts, including those in the south-west, to commit to the national Agenda for Change agreement.’

Ms McAnea’s reference to trusts in the south-west was no accident. The SWC has been highly controversial, despite the consortium backing the national pay framework and the talks on amending AFC.

A health minister described it as ‘heavy-handed’. Unions see the consortium as an attack on national pay bargaining and had said the existence of the SWC threatened to stymie the national negotiations.

Despite this, the talks were concluded and the consortium plans to soldier on – but for how long? In return for agreeing to the changes, the unions want the consortium, and other trusts looking to move away from national contracts, to stand down.

Ms McAnea called on employers to show their commitment to AFC. ‘The changes to Agenda for Change are a bitter pill for our members to swallow, but all around them they see the harsh reality of government cuts on patients and staff. However, before they feel confidence in these proposals, they need to know that their employers are not going to renege on the negotiations and go it alone,’ she said.

‘The breakaway south-west cartel has destroyed the confidence of staff across the whole of the NHS. We want NHS employers across the country to rebuild that trust by giving a clear signal that they will not threaten staff with breakaway terms and conditions if this deal is accepted.’

Some unions on the staff council will not recommend their members agree to the changes. Unite head of health Rachael Maskell said the changes amounted to the removal of collective pay bargaining and the introduction of performance-related pay. ‘We will consult with our members and the outcome will be known after Christmas. If rejected, we will prepare for industrial action should the employers try to impose these changes,’ she told Healthcare Finance.

She dismissed the recent decision of the Royal Bournemouth and Christchurch Hospitals NHS Foundation Trust to withdraw from SWC as it is planning to merge with Poole Hospitals NHS Foundation Trust, whose chief executive leads the consortium. The Bournemouth trust said it had taken the decision because it was encouraged by the progress in the national negotiations and it felt its membership was a ‘significant distraction’ to staff ahead of the proposed merger.

Like hospital reconfiguration, changing staff terms and conditions is tricky. The proposed agreement includes provision for ongoing review of AFC to maintain sustainable national pay and conditions. Local aspects still appear to be in the mix, particularly while the government’s position on market-facing pay remains equivocal – some ministers backing it, others not. Even if the latest national proposals to amend AFC are accepted by staff, they are unlikely to be the last.