NHSE tries to put £2.3bn cap on agency staff spend

ICSs have been told to cut spending on temporary staff by providers in their area by at least 10 per cent, or £257m, on 2021-22 levels, taking expenditure down to a total of £2.3bn nationally. A letter to finance directors sent today, seen by HSJ, says: “This will mean that some systems will need to go beyond their current financial plans to reduce agency expenditure.”

The move is part of a wider efficiency crackdown from NHS England, with further national control measures to be introduced over the next 18 months. HSJ understands that the renewed drive will focus on five other areas in addition to agency spend: medicines, pathway redesign, corporate services, procurement and specialised commissioning.

The extra savings ask comes on top of ICSs already committing to £5.5bn in efficiencies over 2022-23, which Nuffield Trust CEO Nigel Edwards said was “not a credible savings target”.

ICSs and their constituent trusts will be monitored on their performance against the ceiling from 1 September, according to the document, with each area assigned an expenditure limit, the letter says (see below).

Agency spending caps were applied at a trust level from 2015 but have not generally been enforced during the pandemic — and agency spending has grown during that period. Trusts have had additional covid funding to spend, and been in need of additional staff capacity due to major operational challenges. There is also evidence some ‘off framework’ agencies have been driving up rates — an issue said to be exacerbated by rapidly rising costs of living.

The NHSE letter continues: “…Significant progress has been made to reduce agency expenditure over the last five years. Throughout the pandemic, though, we have seen expenditure begin to increase and, following wide engagement, we will be reestablishing oversight measures to support you to maintain a sharp focus on reducing these costs.”

NHSE’s letter said hitting the targets set out today “will reduce agency expenditure to below pre-pandemic levels”. It goes on to warn that a system spending exceeding its agency limits could see it downgraded under NHSE’s oversight framework, with performance against the ceiling considered alongside “other information including agency expenditure as a proportion of total pay bill, compliance with agency price caps and usage of off-framework agency staff.”

Flexible working for substantive staff will be central to reducing agency bills, the letter says, promising further tools “focused on maturing the various temporary staffing services that exist across the country”. Integrated care boards will be encouraged to explore collaborative staff banks and staff sharing arrangements, it adds, with providers asked to share agency expenditure and bank pay rates with system partners.