NHS managers have called for unions and employers to start talks now on the NHS pay deal from 2011-12 in a bid to minimise job losses.

Staff pay represents more than 40 per cent of total NHS spending. There are concerns that with analysts projecting a shortfall of up to £25bn by 2013-14, headcount reductions will be inevitable.

NHS Confederation chief executive Steve Barnett told HSJ: “We need to sit down with the trade unions as quickly as we can.

“If we are in a situation where we could be £20bn short, mature people are going to have to sit down and talk about how that gets managed. There cannot necessarily be inflation based [pay] increases each year,” he said.

Speaking at the NHS Confederation conference last week, Royal Bournemouth and Christchurch Hospitals foundation trust chief executive Tony Spotswood said the scale of required savings implied a 15 per cent reduction in the workforce - equivalent to around 180,000 staff or £5bn of the annual pay bill.

That would equate to more than half of the public sector jobs the Chartered Institute of Personnel and Development this week warned are likely to go between 2010-11 and 2014-15, triggering strike action and “guerrilla war” from public sector trade unions.

However, health secretary Andy Burnham told HSJ it was still too early to begin detailed negotiations. “It’s hard to sign a new pay deal without knowing what the next spending review is. We couldn’t sensibly sign a new deal - but we could do the preparatory work,” he said.

Managers have told HSJ that attempts to minimise redundancies through workforce planning and natural wastage are hampered by the uncertainty surrounding the pay deal after 2011.

The rest of the economy could be moving into recovery by then, making it difficult to cap public sector increases in the face of rising salaries in the private sector.

Unite national officer Karen Reay said her union’s members were angered by the suggestion that the first port of call for cuts should be staff and pay. She pointed to the £300m a year the NHS spends on management consultants and claimed the operation of the internal market cost another £20bn.

She said her union would not accept a 2011-12 settlement below the going rate in the rest of the economy and warned “staff will vote with their feet” if that was the deal.

HSJ understands other unions may be more open to a pay deal that balances a low pay increase with guarantees over staffing levels, the NHS pension and career flexibilities.

Unison national officer Mike Jackson told HSJ the union would be happy to discuss another three year deal now “without prejudice”, but members would be looking for guarantees over inflation. “Just as NHS trusts want pay certainty, so do our members,” he said.

NHS Employers director of pay, pensions and employment Gill Bellord said it was “very much open” to having early conversations with unions, but confirmed these were not taking place at present.

But she added that with 30,000 people retiring from the NHS each year, job cuts were “not inevitable”.

Fresh attention is also likely to be paid to trust spending on agency staff.

Department of Health figures show that during the cutbacks of 2006-07, when the NHS was pulling itself out of deficit, agency staff spending dropped by a third to £798m, or 1 per cent of total NHS spending. The following year the cash amount grew by 11 per cent.

NHS workforce in numbers

Total staff employed

  • 1998: 1,071,562
  • 2008: 1,368,693
  • Increase: 28 per cent

Total spending on NHS staff salaries

  • 2005-06: £33.9bn (47 per cent of NHS spending)
  • 2006-07: £35.2bn (45 per cent of NHS spending)
  • 2007-08: £36.5bn (42 per cent of NHS spending)

Total spending on management, administrative and clerical posts at PCTs and trusts*

  • 2005-06: £5.4bn (7.3 per cent of NHS spending)
  • 2006-07: £5.3bn (6.8 per cent of NHS spending)
  • 2007-08: £5.0bn (5.8 per cent of NHS spending)

Spending on agency staff*

  • 2005-06: £1,182m (1.6 per cent of NHS spending)
  • 2006-07: £798m (1.0 per cent of NHS spending)
  • 2007-08: £883m (1.0 per cent of NHS spending)

*Excludes foundation trusts

Sources: Department of Health, NHS Information Centre, York Centre for Health Economics