Agenda for Change was built for a feast. How will it cope with famine?

The once-in-a-lifetime funding boost was the engine for changes which – among other achievements – delivered record levels of patient satisfaction. It also reset the level of acceptable NHS spending and, therefore, significantly influenced the Conservatives’ decision to protect it from most public spending cuts.

Without the 2002 Budget the nation would be involved in a debate over the size and purpose of the NHS far more profound than the one that bubbles away now.

Imagine an NHS still struggling with the 18-month waiting times which patients suffered at the start of the last decade. Under that scenario it is very likely serious questions would be being asked about a state-funded system’s fitness for purpose.

But the 2002 Budget did not only reset public expectations, it did the same to those held by NHS staff. They had seen the service receive inadequate investment for decades and watched their own standard of living decline. There was a big gap to close both in terms of staff numbers and reward.

The 2002 Budget met that challenge, providing the funding to drive tens of thousands more doctors and nurses into the system and facilitate a series of pay reforms which made NHS staff some of the best paid in the world.

But now, just as the service is beginning to scratch its head over what it will do with all the doctors in the career pipeline, it is querying how the pay mechanisms created by the reforms can be used to return staff expectations to something approaching pre-2002 levels.

The Department of Health has reaffirmed its faith in Agenda for Change by arguing that it should be used to deliver regional pay. Its grip on the service is reinforced by the – unsurprising – news that clinical commissioning groups will also have to employ staff on Agenda for Change terms.

The DH’s plan would see regional differentials created by constraining pay in most of the North, the South West and potentially, everywhere outside London and the Home Counties.

Most NHS leaders will breathe a sigh of relief that Agenda for Change is to continue; few had the appetite for local pay bargaining – as demonstrated by the fact that Southend is the only NHS provider to exercise a foundation trust’s right to break away. However, many in the expanded “higher cost zones” will wonder where the extra cash is coming from, while those targeted to receive “constrained” awards will not look forward to the staff unrest and unhappiness that will create.

All will also notice the DH remains silent on reducing the amount of Agenda for Change pay increments automatically awarded each year, despite NHS deputy chief executive David Flory’s warning that it could “bust” the service. Responsibility for controlling increments remains firmly with individual organisations, something, which is much easier said than done, as Morecambe Bay has recently found out.

However, worse is to come. The 2012 Budget arrives from a different planet, not to mention time, from 2002’s embarrassment of riches. An analysis by Nuffield Trust chief economist Anita Charlesworth pokes painfully at how its expectations will require NHS pay constraint to continue even after the economy begins to recover.

“By 2015-16”, she warns, “average earnings will be increasing by 4.5 per cent. Holding down public sector pay against this background looks very tough”.

In 2002, HSJ declared that “Agenda for Change is the most significant and long-awaited pay reform in the NHS for a generation”. Ten years later it faces its sternest test.