NHS job cut warning: a 1 per cent pay increase equals 10,000 jobs

The call came as NHS Employers was expected to tell the NHS pay review body the final year of the three year NHS pay agreement should be honoured, with the proviso that the NHS allocation for 2010-11 also stays as set.

We want the onus moved away from us and put on staff to prove their performance is up to scratch

But University College London Hospitals Foundation Trust chief executive Sir Robert Naylor told HSJ a pay freeze from April 2011 was now urgent. He said that every 1 per cent increase in pay from then onwards would need to be matched with a 1 per cent headcount reduction - the equivalent of more than 10,000 jobs.

“It’s unrealistic for staff and the public to think there will be pay rises for staff, given the economic circumstances,” he said.

“If the public sector isn’t going to be funded in accordance with inflation - as seems unlikely - then the new government next spring will have to decide whether it can afford a pay a rise for staff, bearing in mind every 1 per cent on pay is 10,000 potential job cuts.”

Sir Robert’s call comes as foundation trust senior managers have started to consider using their freedom to step away from the Agenda for Change standardised pay and conditions for nurses and other non-medical staff. It also followed health secretary Andy Burnham’s pledge to publish a four year NHS tariff later this year, which means acute trusts will be able to model their income, but will still be uncertain of the greatest proportion of their costs, which is pay.

At present only one foundation trust - Southend University Hospital - has opted out of Agenda for Change in full. Sir Robert said the preference would be for changes to be made nationally, as individual trusts risked losing staff to other organisations if their terms were not competitive.

“We need a fundamental review of Agenda for Change,” he said. “The issue is the whole pay agenda - doctors as well as Agenda for Change. But individual trusts need to be very wary of tinkering themselves.”

Newcastle upon Tyne Hospitals Foundation Trust chief executive Sir Len Fenwick said Agenda for Change had been “disappointing” as it had not delivered the hoped for improvements in staff productivity.

He said: “I don’t think many chief executives have been able to speak out. But there is now a dawn of realisation it’s not what it’s cracked up to be.”

Sir Len said Agenda for Change had brought benefits for the NHS in the form of equal pay for equal work and bringing consistency between providers. But the current arrangements were “overly prescriptive” and gave too much opportunity for staff to “game” and “tweak” their job profiles to move up a pay grade. This meant it was a real “value for money and public interest concern,” he said.

The finance director of another trust told HSJ a further problem was the “automatic assumption” in the current national contracts that staff would progress an increment up their pay scale each year - this meant most staff could expect their pay to increase by almost 1 per cent a year even if there was no national uplift to account for inflation.

The trust already plans to cut 100 posts in each of the next four years; 20 per cent of which will be clinical. The director said a national pay freeze would reduce that number.

The director added: “The onus is on us getting staff through their gateway [review to proceed to the next series of increments]. We want the onus moved away from us and put on staff to prove their performance is up to scratch. We also want the ability to say particular members of staff will not move beyond a certain point on their 10 point scale.”

At Southend University Hospital Foundation Trust locally agreed terms and conditions allow for that, although head of HR operations Keith Warrior said a staff member would only be prevented from progressing up their agreed increments if they had already been warned their performance was not satisfactory.

Mr Warrior told HSJ there had always been interest in the Southend system from other foundation trusts, but that was now growing.

“Before, it was out of curiosity,” he said. “Now it’s about the practicalities of doing it.”

Foundation Trust Network director Sue Slipman said foundations were collectively “looking for greater flexibility” in the national contracts. That included how sickness leave was managed and temporary changes to job descriptions.

“There are trade-offs here. The objective is to save as many jobs as we can. The inflexibility of Agenda for Change doesn’t help that,” she said.

Unison head of health Karen Jennings said managers were “premature” in starting to discus NHS pay for 2011 already, given how volatile the economy and inflation rates had been.

She said: “Trust chief executive sabre rattling isn’t going to help us find solutions to productivity.”

However, the government has already signalled its intention to crack down on future pay deals in other parts of the public sector. Schools secretary Ed Balls said last week that the next three year pay deal for teachers would be “tough” and lower than the current 2.45 per cent deal.