Foundation trusts are drawing up plans to freeze automatic pay increases in a move which could affect up to half a million NHS staff.

HSJ has spoken to foundation trusts in five of the 10 strategic health authority regions which say they desperately need to freeze Agenda for Change increments in order to make cost savings of 4‑5 per cent a year for the next four years.

If you are concerned about keeping your job in the long term, then you will be alive to the trade-off. Enlightened staff will be thinking that

As yet, no foundation trust has gone public with its plans and all hope the Department of Health or the Treasury will heed their quiet lobbying and implement a national freeze instead. However, some have indicated to HSJ that they are prepared to go it alone if necessary.

Any halt in increment increases would sit on top of the two year cost of living freeze announced in the June emergency Budget.

The majority of staff on Agenda for Change contracts move up one increment on their pay scale each year - ostensibly to reflect their growing skills and experience. To a staff member at the bottom of band 5, a single step up the pay scale increases their pay by 2.9 per cent.

A number of foundation trusts - such as Salford Royal - have already implemented partial increment freezes for staff with high sickness absence rates, and most are attempting to implement more stringent tests before allowing staff to climb a step up their pay scale each year.

HSJ has now learnt that a handful of foundation trusts are preparing to take this policy further, while many more are waiting for others to take the first leap before they follow.

One chief executive of a foundation trust in the North told HSJ: “Yes, we are prepared to push the button. We are canvassing other FTs in [the region] to hopefully gain a group of hospitals who can go together.”

“We have debated the issue at board [level] and almost went alone this year. We may [still] need to even if no one else joins us.”

The finance director at another northern foundation trust told HSJ that the total cost of annual increments to an average acute hospital was equivalent to around 1.2 per cent of annual income - about £3m on average each and £360m across the entire foundation trust sector.

The director said at their most optimistic, acute trusts might hope to find around half of their 5 per cent annual cost savings from areas other than pay.

This leaves an average foundation trust with an income of around £230m with a further £6m to cut each year - equivalent to 180 posts with an average salary of £33,000 a year or 720 jobs over four years.

The finance director said the choice was a clear one between jobs or pay increments. A four year delay would save 360 jobs.

The finance director said: “The end game in this pay bill/workforce trade-off is simple. With no growth in the system, each £1m we save on incremental progression saves 30 posts that would otherwise be casualties.”

The trust is in the early stages of drawing up a contract it plans to present to existing staff to sign on a voluntary basis in exchange for guarantees around redundancies. New staff would not have the choice.

Earlier this week it emerged that Norfolk and Norwich University Hospitals Foundation Trust had told staff it wanted to introduce a separate contract for new recruits and staff members changing role.

Proposals include blocking incremental progression for the first two years of a new contract, as well as paying only the statutory minimum sick and maternity pay during that period.

A spokesman for the trust said: “Staff are by far and away the biggest cost to any acute NHS trust and we are looking at ways of making savings on those costs.”

The Norfolk and Norwich proposals will not affect the majority of existing staff. However, foundation trust chief executives have told HSJ they want an increment freeze that does.

One chief executive from central England said: “We’re looking at reducing increments or stopping increments or having a freeze for a couple of years. We’re hoping this will come as a national agreement - a freeze for a couple of years.”

Foundation Trust Network director Sue Slipman told HSJ she did not believe there would be a national deal as the government wanted to avoid a confrontation with unions.

Only foundation trusts are able to set local terms and conditions. NHS trusts and primary care trusts must follow national deals.

Ms Slipman said this left foundation trusts in some areas needing to balance their desire to freeze increments against the possibility of losing good staff to a competing NHS trust.

However, a counterweight was the uncertainty staff at non-foundations had about the future of their organisations.

Ms Slipman said: “If you are concerned about keeping your job in the long term, then you will be alive to the trade-off. Enlightened staff will be thinking that.”

The hurricane of protest over NHS pay can be calmed by honest debate