Up to 5,700 administrators and commissioners could be made redundant by primary care trusts and strategic health authorities next year, the Department of Health has indicated.

Both the 2010-11 operating framework and the health secretary’s strategy paper - NHS 2010-2015: from good to great. Preventative, people-centred, productive - have set a target for PCTs and SHAs to reduce their management costs by 30 per cent over the next four years. Cutting procurement and “back office” costs and merging management functions with other organisations, including local authorities, are identified.

‘I don’t want to hide it: it’s true. You can’t take a third out without affecting the workforce’

David Nicholson

The DH wants half of the cost cutting to happen in the 12 months from April, rather than be staggered over the four years, diminishing the effectiveness of recruitment freezes.

NHS chief executive David Nicholson told HSJ the DH wanted to “front load” the cuts into year one, 2010-11: “We’d like to see up to 15 per cent in the first year if we could.”

The changes are due to save around £420m from PCT and SHA management costs a year. Mr Nicholson said it was necessary to restructure early as some changes would not yield savings until the second or third year.

Asked if those changes would include redundancies, Mr Nicholson said: “Obviously, we’ll do everything we can to avoid all of that. But it’s a substantial amount of money being taken out of SHAs and PCTs and there are consequences for the people who work in them, absolutely.

“I don’t want to hide it; it’s true: You can’t take a third out without affecting the workforce,” he said.

Although health secretary Andy Burnham’s five year strategy said the DH was “exploring” giving employment guarantees in exchange for pay restraint and flexibility for “frontline staff”, no such reassurances have been offered for “back office” or managerial staff.

By September 2008 there were just over 60,000 staff categorised as “NHS infrastructure and support” working in PCTs and SHAs. A 15 per cent cut in their numbers would equate to 9,000. But the DH appears most focused on the 38,000 people it has identified as “working in commissioning”.

A 15 per cent reduction in those commissioners would equate to 5,700. Those professional level posts would closely match the posts deleted during the PCT reconfigurations of 2006-07, when there were 2,330 compulsory redundancies with an average payout of £82,446.

If that sum was paid to 5,700 staff next year, redundancy costs would reach £470m. Some of the costs might be avoided by natural wastage and savings other than staff costs, such as procurement.

During 2007-08 10 per cent of clerical and managerial staff left an NHS employer, but a large proportion left for another NHS organisation. Even if that natural wastage is matched next year, a further 1,900 might need to be made redundant, costing around £157m.

PCT Network director David Stout told HSJ that after management consultancy and temporary staff had been stripped out, PCT costs were “almost entirely staff costs”.

He said: “There is a pretty narrow range of things we can focus on. Pretty soon you get into cutting people who are in posts now.”

NHS Employers director Sian Thomas said the focus first should be on reducing the wage bill rather than head count, to avoid costly redundancy payouts. She said this could mean moving people into part time work, offering sabbaticals or simply lower paid work or early retirement. Some commissioners could be retrained to do commercial work for NHS providers.

Speaking at last week’s Healthcare Financial Management Association annual conference DH director general of NHS finance, performance and operations David Flory said the department would soon publish further guidance on making the cuts.

Asked to justify such rapid cuts, he said: “If you look at the staff numbers and the wage bill in PCTs since 2007, the increase has been huge and very steep [and now] we need to significantly reverse the trend.”

The operating framework - which is due to be published in full this week - will require all PCTs to set aside 2 per cent of their allocations from next year for “non-recurrent” or “one-off” spending. Nationally the figure accounts for around £1.7bn.

Mr Nicholson told HSJ he was relatively open minded about how organisations made their cuts but they needed to be firm and implemented rapidly.

He said: “I’m not interested in proposals. I want the money in the tin; I’m counting on the money.”

He said he is particularly keen to see mergers of PCTs that are not coterminous with their local authorities. But he said he did not want to see a “reconfiguration fest”.

He said: “We haven’t got the time or the energy for that to happen; we’ve got too many other things to do.”

Finance plan

For PCTs

  • 2010-11 allocations remain: average increase of 5.5 per cent
  • 0.5 per cent extra efficiency needed for new responsibilities
  • 2 per cent set aside for one-off costs of change
  • £400m surplus spent by April 2011
  • Assume inflation-only increases from 2011-12 onwards

For hospitals

  • No inflationary uplift to tariff
  • Up to 1.5 per cent extra available through CQUIN
  • Unplanned activity over 2008-09 levels at 30 per cent of tariff
  • Changes due to specialist top-up values
  • Tariff prices could be cut