We have too much to lose as patients and taxpayers to repeat the 1990s’ flirtation with local pay negotiations.

“To provide maximum scope to encourage local bargaining on self-financing pay increases” - chancellor of the exchequer.

I have heard individual trust HR directors describe how constrained they feel at having so little control over the pay “levers”

In the wholesale structural changes announced in the white paper Liberating the NHS in July it was easy to miss the sentence on the pay and reward implications. It states that “in future all individual employers will have the right to determine pay for their own staff”, seemingly signalling the end of the national Agenda for Change framework of bargaining and terms and conditions.

Some will react positively to the new freedoms. I have heard individual trust HR directors describe how constrained they feel at having so little control over the pay “levers” to support organisational change. Local pay rates, productivity and bonus plans, and flexible benefits schemes could all be coming.

But for others of us, the sentence induces a wry and knowing smile. My opening quotation was not a reaction to this white paper. It comes from late 1993 and the reorganisation then announced to establish independent health trusts. My own HSJ article at that time queried: “Why is the NHS adopting pay strategies rejected by the private sector?” It predicted some of the dangers and was unfortunately prescient.

There was widespread support, after the very mixed experiences of the 1990s, for the Agenda for Change reforms and the introduction for the first time of a national structure of bands covering all non-medical NHS staff. Few within the NHS have called for the total removal of this structure.

Research in the private sector and among local authorities confirms that local pay gives the freedom to better react to specific employer needs and market conditions. But it also leads to a huge duplication of effort and often raises questions about the capability of those managing these freedoms. It can defeat organisation-wide objectives, for example for career development. Improvements in this area and encouraging “the skills escalator” were drivers of the Agenda for Change reforms.

Most trusts in the 1990s would have also argued that there was not the financial freedom, in reality, to change much at the local level. Now as then, the trade unions strongly oppose localisation.

Gender pay gap

According to TUC general secretary Brendan Barber, “it would mean a pay bureaucracy in every hospital… and would see those at the top paying themselves even more”.

Most worryingly of all for the government, as can be seen from the experience of the few local authorities that have opted out of national bargaining, it is a more, not less, expensive strategy to operate.

Another fear must be that the national gender pay gap will widen as trusts outside London and the South East reduce starting rates, particularly for predominantly female-held jobs in the lower bands. Female pay levels in the regions are up to 13 per cent more in the public sector than the private. Research also shows that in reality, pay cuts are difficult and pay and bonus levels, especially for senior roles, tend to increase faster for those outside the national bargaining arrangements.

The Institute for Employment Studies jointly hosted with the London School of Economics a debate earlier this year on HR trends in large private sector organisations. The theme “What’s winning, corporate consistency or local culture?” was definitely resolved in favour of the former. Participants such as Shell are being driven by corporate standardisation and consistency of HR and reward processes, such as appraisal and performance-related pay.  

As one communications company represented in the debate commented, looking for recession-induced cost savings forced it to ask why it had eight different performance appraisal systems operating throughout Europe. Now it has just one common one. Even traditionally heavily devolved companies such as Arup and Canon are moving to more consistency at the regional level, trying to achieve a balance of the benefits of both local freedom with transnational co-ordination. But in the NHS, of course, the regional structure is being completely removed, with potentially a huge loss of HR and organisation development expertise in the process.

I have been working with NHS Employers, trade unions and the Department of Health to try to achieve the same balance in reforms being made to the national knowledge and skills framework that was introduced as part of the Agenda for Change reforms.

Our research report documents how we found the system to be complex, over-prescribed and difficult to apply, particularly for non-professional staff. But while now encouraging simplification and local tailoring, maintaining the national framework approach will support career development and avoid the expense of every trust having to develop their own approach from scratch. The new approach is being launched at the NHS Employers annual conference next week.

Memories in the internet age are short. Political dogma must not be allowed to obscure the dangers of repeating the 1990s experiences with local pay in the NHS, from which staff and we as patients and taxpayers are likely to suffer.