NHS pay review body: twenty-sixth report 2012 - Official Documents

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highest of the UK regions. The DHSSPSNI cited Croner Reward 11 which indicated that
consumer prices had increased by more in the UK (6.4% per annum) than in Northern
Ireland (5.2% per annum).
NHS Employers (NHSE)
3.29 NHSE commented that the shortage of alternative jobs following the recession was likely
to be the key reason NHS turnover had decreased. In the wider job market, Jobcentre
Plus live unfilled vacancies had fallen from April 2010 to April 2011 for occupations
equivalent to those in AfC Bands 1 to 4. NHSE added that NHS pay rates continued to be
competitive with other sectors based on data from Incomes Data Services.
Staff Bodies
3.30 The Staff Side noted that the UK was emerging from the worst recession in 70 years
although the prospects of recovery were far from certain. They pointed to high
unemployment, few vacancies and economic activity sluggish at best. The Staff Side
considered that the combination of high inflation, weak earnings growth and fiscal
tightening had caused a fall in real disposable income. The OBR expected household
incomes in 2011 to contract for a second year in a row with the Institute of Fiscal Studies
stating that UK households were experiencing the most severe protracted fall in incomes
since the 1970s.
3.31 The Staff Side noted that the UK Government’s economic strategy centred on public
spending cuts of £81 billion and tax rises of £29 billion by 2014/15 which was designed
to boost investor confidence and improve private sector investment leading to growth in
manufacturing and exports. The Staff Side raised concerns about further changes such as:
freezing child benefit; cuts to child tax credits; caps on housing benefits; and CPI, rather
than RPI, increases to benefits and pensions.
3.32 The Staff Side commented that both RPI and CPI inflation had been running ahead of
NHS pay awards for the great majority of the last three years – RPI inflation above the
award for 67% of the period since January 2008 and CPI inflation ahead for 79%. They
added that the most striking aspect was the “yawning gap” opening up over the last year
between inflation and NHS pay awards. The Staff Side also pointed to the HM Treasury’s
average of independent forecasts showing inflation remaining high for 2011 and falling
by the end of 2012 but still meaning a “giant gap” between inflation and pay awards if a
further pay freeze was imposed.
3.33 The Staff Side provided information on the effect of RPI inflation on wages between
2007 and 2012 for NHS staff at the top of their pay bands (Bands 1, 5 and 8a). From this
information, they concluded that the best projections available suggested that inflation
will have cut out between 6% and 10% from the value of staff wages by the end of the
two-year pay freeze. In addition, the Staff Side highlighted that, according to Croner
Reward12 , the lowest income group required the biggest rise in income to maintain
their existing standard of living at 6.6% over the year. They cited the Institute of Fiscal
Studies13 which found that the greater tendency of low income households to spend a
higher proportion on fuel and water meant, on average, that they had higher inflation
rates than higher income households. Finally, as part of their argument that inflation was
running at a higher level for the lower paid, the Staff Side analysed changes in the price
11 Croner Reward (September 2011) – Cost of Living Comparisons.
12 Croner Reward (March 2011) – Cost of Living Comparisons.
13
Institute of Fiscal Studies (June 2011) – The Spending Patterns and Inflation Experience of Low-Income Households –
Levell P and Oldfield Z.