Lower-than-expected NHS pay awards whip up a storm

Against a background of mounting financial problems, the pay review bodies recommended increases ranging between 1.5% and 3% for NHS staff in 2006, although the decision to stage the consultants' pay award grabbed most of the headlines.

In recent years, the annual NHS pay round has passed largely unnoticed, with the majority of the health service's 1.33 million employees covered, either directly or indirectly, by a three-year pay and conditions agreement underpinning the introduction of Agenda for Change (AfC), the new NHS pay system (see The end is in sight for NHS pay modernisation ). However, this deal came to an end on 31 March 2006 and, for the first time since 2002, the renamed Nursing and Other Health Professions Review Body (NOHPRB) was called on to make pay recommendations for its now expanded remit. The Doctors' and Dentists' Review Body (DDRB) had continued to make recommendations for its remit groups during the life of the three-year deal (see table 1)¹.

Unfortunately for all concerned, the end of the long-term agreement coincided with a well publicised NHS cash crisis that has led to claims that, despite additional funding, the health service is heading for a deficit of up to £1 billion. As a result, individual NHS trusts have announced thousands of job losses in a frantic attempt to balance the books. Higher-than-anticipated expenditure associated with the introduction of AfC, together with the cost of the new contracts for both consultants and GPs, were largely blamed for the financial black hole facing the health service, bringing the issue of NHS pay firmly back into the spotlight.

The government had one eye on the cost implications when submitting its evidence to the review bodies - not least because it is estimated that wages typically account for around 60% of an NHS trust's budget - and it certainly was mindful of the escalating deficit when deciding how the review bodies' recommendations were to be implemented. This was true, in particular, of the awards for hospital consultants, whose pay deal is to be staged.

2.5% for nursing staff

Of the two NHS pay review bodies, the largest in terms of number of employees covered is the NOHPRB. It encompasses several key NHS employee groups, including:

The 2006/07 recommendations were made against the background of the continued implementation of AfC. Given that the roll-out, which began nationally in December 2004, has not been completed, the NOHPRB decided to concentrate its efforts on determining the level of an across-the-board increase for its remit groups. It set aside any issues relating to possible structural changes to the pay system.

Following the end of the three-year deal covering the period between 1 April 2003 and 31 March 2006, both the Department of Health (DH) and the staff-side unions had asked for a one-year award, and the review body agreed to this request, despite both NHS Employers and the national assembly for Wales arguing for a long-term settlement.

Having considered all the evidence presented to it - including a controversial submission from Patricia Hewitt, secretary of state for health, asking for the NOHPRB to "consider a recommendation as close as possible to 2%", after the DH had originally asked the review body to limit any award to "no more than 2.5%" - the NOHPRB recommended that a 2.5% increase should be applied to all AfC pay rates with effect from 1 April 2006. After some behind-the-scenes prevarication, this was accepted by the government. The new scales are set out in table 2.

Location payments (known as high cost area supplements) rise in line with the general award from the same date, and are as follows:

The review body declined to make any recommendations in respect of national recruitment and retention premia (RRP) for pharmacists, occupational therapists, cytology screeners, radiographers and othoptists, noting that, under AfC, individual employers are able to pay localised RRP provided specified criteria are met. However, those submitting evidence to the review body have been asked to discuss with the Office of Manpower Economics the data that need to be provided to support the case for national RRP in future.

Pay awards for non-review-body staff

The NOHPRB makes pay recommendations only in respect of nurses, midwives, health visitors and professions allied to medicine on AfC terms and conditions. While this encompasses around 50% of NHS staff, there are other significant, non-medical groups that are not covered by the review body, including cleaners, electricians, plumbers, builders, medical secretaries, receptionists and HR and IT staff. Their terms and conditions are determined as a result of negotiations between the various trade unions and NHS Employers under the auspices of the NHS Pay Negotiating Council (PNC). The PNC replaced the relevant functional Whitley Councils and other related bodies that previously had responsibility for negotiating NHS pay awards prior to the introduction of AfC.

The PNC staff side had originally claimed a "substantial increase significantly above the rate of inflation for all, and the removal of the lowest pay band to raise the minimum wage to £6.08 per hour at 2005 pay rates". In addition, it also sought a flat-rate element for those on the lowest grades - pay bands 2 and 3. In submitting its claim, the staff side specifically "rejected the calls by the chancellor for public sector pay increases for 2006/07 to be capped at 2%".

In response, the employers' side offered a 2.5% increase, in line with the award for NOHPRB groups, but declined to increase the national RRP paid to maintenance craftworkers, maintenance technicians and chaplains. It also declined to consider a staff-side claim for the extension of the national RRP to building craftworkers - currently in receipt of locally agreed payments. As a result, negotiations broke down and, at the time of writing, had not resumed.

In addition to staff covered by the PNC, there are an estimated 30,000 NHS employees in England alone who have yet to be assimilated to AfC, with a significant number of staff in Scotland, Wales and Northern Ireland in a similar position. The trade unions have asked for a payment to be made to these employees pending their assimilation to AfC pay scales.

A separate group of NHS staff has opted to remain on their existing individual trust/local contracts rather than move onto AfC rates. The trade unions have declined to make a national claim on behalf of these employees because their contracts continue to exist as a form of pay protection against losses arising from the job evaluation exercise underpinning the new pay structure. As the staff side is committed to the equ pay principles of AfC, it concluded that it would be "potentially inconsistent" to argue that those on local contracts should have their pay increased "if the consequence of this was to perpetuate unequal pay within employing organisations for the same work". The unions added that, in their opinion, it would be "highly unlikely that employers would agree to uplift such contracts as it would make them vulnerable to equal pay claims".

Finally, the health services' most senior managers - a group estimated to be some 4,500 strong and not covered either by a review body or by the PNC - receive a staged pay increase of 1%, payable from 1 April 2006, with the remaining 1.2% to be paid from 1 November 2006. This is worth 1.5% on an annualised basis, in line with the award for hospital consultants (see below).

Unions give their reaction

Unison, Britain's largest trade union, said the size of the NOHPRB award was "disappointing", although it welcomed the government's decision to implement the review body's recommendations in full, without staging. It also welcomed the fact that the NOHPRB had "not bowed" to DH pressure to keep the award down to 2%, adding that it was "vital that health professionals are able to trust the independence of the review body".

The Royal College of Nursing (RCN) was also less than enthusiastic about the outcome. Janet Davies, the RCN's director of service delivery, said: "At a time when utility bills continue to rocket, and nurses are faced with council tax increases of 4.5%, this award of just 0.1% over inflation will be very disappointing to many nurses. For a newly qualified staff nurse, the 2.5% award represents [a rise of] less than £10 a week. It is not the substantial increase that nurses deserve."

Amicus, which represents 100,000 professional and skilled members working in the NHS, hailed the 2.5% rise as a "victory for independence". The union's head of health, Gail Cartmail said: "While this recommendation and pay award does not meet all our members' expectations, nevertheless we welcome the review body's confirmation of its independence. We recognise that the review body was under considerable political pressure from the chancellor and the health secretary to limit any award to 2%, and we are pleased that they resisted this unacceptable pressure."

Doctors and dentists

Consultants feel the pain

The key recommendation contained in the DDRB's 35th report was that 129,776 NHS doctors and dentists covered by its remit should receive a baseline increase of 2.2%, to be applied to national salary scales with effect from 1 April 2006 "unless there are reasons to depart from that for specific groups".

Unfortunately for some 31,000 consultants, the government - after a lengthy deliberation that delayed the publication of the DDRB's recommendations - decided that there were indeed reasons to vary the award for this high-profile and vocal group. It duly announced that their 2.2% increase would be staged, with 1% payable from 1 April 2006 and the remaining 1.2% paid from 1 November, making the award worth a total of 1.5% on an annualised basis. The move, estimated to save £29 million over the 2006/0 7 financial year, was greeted with derision by the British Medical Association (BMA), which described it as "vindictive", "mean-minded" and a "betrayal".

The Hospital Consultants and Specialists Association (HCSA), a TUC-affiliated union representing and advising senior medical and surgical staff in the UK, was hardly enthused about the decision to stage what it said was a "miserly and derisory" pay award. The HCSA said: "Consultants may find this decision easier to accept if the chancellor and the secretary of state had been honest. If they were to admit that the Treasury and the Department of Health had done their sums wrong, then that is one thing. But for government to suggest that consultants themselves are to blame for the financial mess of the NHS, and take a pay cut in real terms as a consequence is a spin too far." The HCSA also pointed out that the staging applied to consultants who opted to remain on their old contracts, even though this group has not benefited from the additional earnings arising from the introduction of the revised contractual arrangements, introduced back in 2003.

The government countered by arguing that the pay of a new consultant on the minimum salary scale had risen from £42,170 in March 1997 to £69,991 from 1 April 2006 and will rise to £70,822 from 1 November - an overall increase of 68% in less than 10 years (see table 3).

In summary, the DDRB's recommendations for the other pay groups within its remit - which were accepted in full by the government - are as follows (see table 4):

The DDRB's recommendations coincided with the introduction of a new contract for NHS dentists on 1 April 2006, covering an estimated 23,000 GDPs in England and Wales. According to the government, the new arrangements will move the service away from the "drill and fill treadmill" towards one that rewards practitioners for providing high-quality preventative care. Around nine out of 10 dentists have opted to accept the new contract and remain within the NHS. As a result, they will earn an average of £80,000 a year, with their gross income much higher than this to cover the costs of running a practice.

The British Dental Association (BDA), the professional body and trade union for dentists in the UK, was far from impressed either with the DDRB's conclusions, or with the new contractual arrangements. Susie Sanderson, chair of the BDA's executive board, said: "Instead of using this pay round to invest in the future of NHS dentistry and to show its confidence and support of the profession, the government has agreed a derisory award which will do nothing to solve the current crisis." On the new contract, she added: "In 1999, the prime minister pledged to ensure everyone has access to NHS dentistry that wants it. This week almost 2,000 dentists have left the NHS. The BDA continues to believe that these reforms will not achieve the government's stated aims of greater access, better prevention and quality of care, and getting dentists off the treadmill. Many dentists have signed in dispute, and this means continuing uncertainty about NHS dentistry."

Noting that there are "no comparative labour market difficulties for the medical staff under its remit in London", the DDRB concluded that there was "no basis, on labour market grounds" for increasing London weighting. Indeed, the review body found that there was an argument for abolishing such payments altogether, although it recognised that taking such action immediately could create considerable problems in terms of motivation and morale. It therefore contented itself with recommending that the London weighting payment should remain frozen at the 2005/06 levels - £2,162 a year for non-resident employees (£602 year for resident staff).

Review body rejects the government's arguments

A clue to the problems faced by the DDRB in producing recommendations for doctors and dentists covered by its remit for the 2006/07 pay round appears in its 35th report: "The evidence on the government side has changed markedly in the course of the review itself … Originally the government had proposed a general pay uplift of no more than 2.5%. It subsequently revised this at oral evidence to 1% for the majority of our hospital remit groups in light of the latest estimates of earnings growth for our remit groups, and some trusts' funding defi cits."

There was also what was described as a "signifi cant disagreement" between the parties on the issue of pay drift - the extent to which the growth in average earnings exceeds the basic pay rise. The issue dividing them was whether or not it was both "legitimate and fair, in considering an annual uplift in pay scales, to take into account the fact that:

After much consideration, the DDRB rejected the government's argument that the effect on earnings from overtime and similar payments should constrain the level of basic pay settlement, not least because, it said, such payments represent extra pay for additional work over and above that contractually required. Neither did the review body accept that the assimilation costs arising from recently negotiated pay modernisation agreements should infl uence its deliberations "as these costs were part of the negotiated agreement, and should have been taken into account during the negotiations, rather than clawed back at a later date".

In a further rebuff to the DH, the DDRB said it would not consider the effect on earnings of the incremental pay system, as the government had asked it to do, primarily because the increase in earnings "arises from pay progression within the recently agreed pay structure, and should have been factored into account when they were agreed".

On the key question of affordability, while noting the importance of cost pressures, the DDRB came to the conclusion that its role is to "look at the pay structure as a whole and, in that context, whether individual trusts are reporting a surplus or a defi cit in any one year cannot be a factor we take into account".

¹ All pay review body reports referred to in this article are available, free, from www.ome.uk.com .

Table 1: Summary of NHS pay review body awards, 2006

Table 2: National salary scales for nursing and other health professions, 1.4.06¹

¹ This is the first year that the Nursing and Other Health Professions Pay Review Body (NOHPRB) has recommended an award based on the Agenda for Change pay scales. The above ranges have been calculated by taking the rates applicable on 1 October 2004 - the date of intended rol-out of the new pay system - as a baseline. The previously agreed 3.225% increase was then applied to these ranges with effect from 1 April 2005. The NOHPRB recommended that a 2.5% uplift was then applied to these rates, effective from 1 April 2006. The resulting figures have been rounded up to the nearest pound.

² Main scale points, excluding transitional arrangements that apply only during assimilation to the new pay system in accordance with the Agenda for Change national agreement.

Job examples:

Band 1: clinical support worker (occupational therapy); healthcare assistant; healthcare assistant - community; payroll clerk.

Band 2: biomedical support worker; clerk typist/clerical assistant; domestic assistant (higher level); HR/personnel assistant (recruitment).

Band 3: clinical support worker dietetics (higher level); finance officer, higher level/senior finance clerk; outpatient appointment clerk (higher level).

Band 4: medical engineering technician (entry level); occupational therapy technician (higher level); team leader, finance.

Band 5: assistant chaplain; assistant clinical psychologist (higher level); fire safety manager; mental health nurse (qualified); qualified nurse (community); speech and language therapist; theatre nurse.

Band 6: hotel services manager; sexual health adviser; specialist dental technician; specialist orthoptist; specialist practice nurse.

Band 7: biomedical laboratory section manager; sexual health advisory service manager (community); specialist physiotherapist (community).

Band 8: arts therapist principal; clinical psychologist principal; consultant pharmacist; head of estates; midwife consultant; nurse consultant; principal speech and language therapist; professional manager (clinical, clinical technical service, social services).

Band 9: clinical psychologist consultant; professional lead/head of psychology services; consultant clinical scientist head of service (molecular genetics/cytogenetics); podiatric consultant (surgery) head of service.

Table 3: Consultant pay scales, 1.4.06 and 1.11.06

¹ Pay thresholds and transitional arrangement apply.

² Local level Clinical Excellence Awards (CEAs) in England.

³ A total of eight commitment awards can be given (one every three years) once the basic scale maximum is reached.

⁴ Closed to new entrants.

⁵ From October 2003, CEAs in England, and commitment awards in Wales, have replaced discretionary points. Discretionary points continue to be awarded in Scotland, and remain payable to existing holders in both England and Wales until the holder retires, or is awarded a CEA or commitment award.

⁶ From October 2003, CEAs in England, and commitment awards in Wales, have replaced distinction awards. Distinction awards continue to be awarded in Scotland, and remain payable to existing holders in both England and Wales until the holder retires, or is awarded a CEA or commitment award.

Table 4: Example whole-time salaries for doctors and dentists on main grades, 1.4.06

¹ Salary scales exclude additional earnings from other sources, such as out-of-hours payments for training grades.

² To be awarded automaticaly, except in the cases of unsatisfactory performance.

³ The trainee in public health medicine scale and the trainee in dental public health scale are both the same as the specialist registrar scale.

⁴ Additional incremental point, to be awarded automaticaly, except in the cases of unsatisfactory performance, as recommended by 2004 review body.