Government's pay deal funding falls short, say NHS leaders

Earlier this year, the Department of Health and Social Care said £800m of extra funding had been set aside “which funds the first year of the Agenda for Change pay deal”. The deal has given NHS staff an average 3 per cent uplift this year.

But there has been uncertainty around the extent to which the funding deal would cover thousands of staff working in social enterprises, outsourced services, wholly owned subsidiaries, or joint ventures, many of whom have transferred on AfC terms and conditions, or have their pay index linked to the AfC contract.

Last month, the DHSC suggested the pay deal would apply to AfC staff employed by these organisations, and that further detail of the eligibility criteria would be set out.

In a letter to trust finance directors this week, seen by HSJ, NHS Improvement said funding is only being provided where the organisation employing the staff is “dynamically” using the AfC contract “in full for both existing and future staff”. It said there would be a “potential clawback” of funds where this is not the case.

The letter adds: “It is the DHSC’s view that it expects most provider wholly owned subsidiaries, joint ventures and outsourced contracts will not meet these criteria.”

The full cost implications for trusts of matching the uplift for these staff is unclear, although one provider with a high proportion of contracted out services said it could cost around £1m for their trust.

There is also concern among some finance directors that vacancies have not been funded, and that this creates an incentive not to recruit. Commissioners will also be under pressure to match the uplift for administrative and nursing staff working in GP practices, who also sit outside the eligibility criteria.

Separately, a small adjustment has been made to “bottom up” calculations that NHS Improvement had submitted for the additional funding pot, which has cut the total amount by around £24m to match the calculations made by DHSC.

Saffron Cordery, deputy chief executive of NHS Providers, which represents trust leaders, said: “NHS trusts and staff and the public were told by the government that the Agenda for Change pay rise for 2018-19 would be funded. We now see that is not the case.

“Because the costs of implementing AfC in full are greater than the amount set aside, an arbitrary adjustment has been applied which means all trusts will receive less than the cost of implementing this deal.

“Plus, some staff groups who had been given to understand that they would receive the full uplift may not get the pay rise they expected, unless trusts – already under enormous financial pressure – take an additional hit.

“This will likely affect thousands of staff, including some whose work has been contracted out or are employed by wholly owned subsidiaries.

“In the case of WOS staff, trusts that have in good faith put staff on terms and conditions equivalent to or better than AfC now face an additional, unforeseen cost pressure.”

The additional funding does cover bank staff, but not agency staff. There will also be a potential clawback of funds in relation to AfC staff working in private patient units, such as those provided by some of the specialist trusts like Great Ormond Street Hospital FT.

The DHSC said in a statement: “We have been clear that we are fully funding a pay rise for all staff employed under full Agenda for Change contracts.”

In the letter, NHSI said it will work with providers “who face material unfunded cost pressures and will discuss with NHS England and the DHSC how we manage these costs within our current financial frameworks”.

The £800m was provided to fund an average AfC pay uplift of 2 per cent in 2018-19, above the 1 per cent baseline that trusts had already planned for. The 0.7 per cent increases in each of the subsequent two years, above the 1 per cent baseline, will be funded from within the new NHS England’s budget.

The Unison union has heavily criticised trusts for transferring non-clinical staff into subsidiary companies, and Sara Gorton, its head of health, said: “It’s good to see that where employers have recognised the value of sticking with Agenda for Change, they will get the additional funding they need.

“But for those health workers who have been cut adrift from Agenda for Change, the future for their pay is uncertain and we risk a widening and damaging gap between directly employed staff and those who work alongside in contractors and arms-length companies.

“Porters and cleaners should not be put beyond the reach of the pay and other terms and conditions agreed at national level, and funded by the government.”