The obstacle of centralised pay

November 03, 2010 10:01 AM

We knew that health and international development would be protected in the build up to the Spending Review. Ring-fencing health was always more popular than ring-fencing aid, but because it has the second biggest budget behind welfare that decision inevitably places huge pressure on other departments. Not only that, the healthcare budget has soared in real terms in the last ten years although studies show that this been met with a decline in quality and productivity.

John Appleby, chief economist at the King’s Fund, thinks that there is likely to be a clash over pay in the NHS at the end of the Spending Review period. After a two-year freeze, staff will be looking at pay-rises again and with a 0.4 per cent annual funding increase this may prove quite difficult.

At a Select Committee session yesterday he came up with some illuminating statistics. He said that there has been a 90 per cent real terms increase in the NHS budget since 1997. But crucially, he also said that 80 per cent to 90 per cent of that had been ‘siphoned off for pay rises for some particular people’.

Has this improved productivity?

"GPs and consultants in this country are some of the best-paid doctors in the world...I think the NHS itself would admit that they have not got as much out of these contracts with GPs and consultants – and possibly the workforce in general – in terms of productivity improvements that they should have."

Sounds like a nice way of saying no.

An explosion in expensive middle-management over that time in relation to staff such as nurses won’t have helped matters.

But the key to relieving the pressure of potential pay disputes is to put an end to the madness that is centralised pay bargaining. As I blogged back in July, the NHS White Paper has this on pay:

"Pay decisions should be led by healthcare employers rather than imposed by the Government. In future, all individual employers will have the right, as foundation trusts have now, to determine pay for their own staff. However, it is likely that many providers will want to continue to use national contracts as a basis for their local terms and conditions."

If the idea is to have a more decentralised system led by healthcare employers this simply can’t happen if centralised pay bargaining is retained. Local healthcare organisations would have no control over their biggest item of expenditure. Ring-fencing inputs – even when combined with nice ideas of patient-led local healthcare – won’t improve things until big obstacles like this are removed. Budgets aside, it also leads to poorer healthcare.

We knew that health and international development would be protected in the build up to the Spending Review. Ring-fencing health was always more popular than ring-fencing aid, but because it has the second biggest budget behind welfare that decision inevitably places huge pressure on other departments. Not only that, the healthcare budget has soared in real terms in the last ten years although studies show that this been met with a decline in quality and productivity.

John Appleby, chief economist at the King’s Fund, thinks that there is likely to be a clash over pay in the NHS at the end of the Spending Review period. After a two-year freeze, staff will be looking at pay-rises again and with a 0.4 per cent annual funding increase this may prove quite difficult.

At a Select Committee session yesterday he came up with some illuminating statistics. He said that there has been a 90 per cent real terms increase in the NHS budget since 1997. But crucially, he also said that 80 per cent to 90 per cent of that had been ‘siphoned off for pay rises for some particular people’.

Has this improved productivity?

"GPs and consultants in this country are some of the best-paid doctors in the world...I think the NHS itself would admit that they have not got as much out of these contracts with GPs and consultants – and possibly the workforce in general – in terms of productivity improvements that they should have."

Sounds like a nice way of saying no.

An explosion in expensive middle-management over that time in relation to staff such as nurses won’t have helped matters.

But the key to relieving the pressure of potential pay disputes is to put an end to the madness that is centralised pay bargaining. As I blogged back in July, the NHS White Paper has this on pay:

"Pay decisions should be led by healthcare employers rather than imposed by the Government. In future, all individual employers will have the right, as foundation trusts have now, to determine pay for their own staff. However, it is likely that many providers will want to continue to use national contracts as a basis for their local terms and conditions."

If the idea is to have a more decentralised system led by healthcare employers this simply can’t happen if centralised pay bargaining is retained. Local healthcare organisations would have no control over their biggest item of expenditure. Ring-fencing inputs – even when combined with nice ideas of patient-led local healthcare – won’t improve things until big obstacles like this are removed. Budgets aside, it also leads to poorer healthcare.

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