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

3.51 NHSE added that the increase in the NHS budget for the period 2011/12 to 2014/15
assumed reductions in management costs and productivity gains would release up
to £20 billion which could be reinvested in front line services. NHSE cited the Centre
for Workforce Intelligence’s research15 which asserted that large cuts to administrative
and managerial staffing could make a modest contribution to savings, but the most
significant savings can be achieved by increasing the productivity and efficiency of
existing resources.
3.52 NHSE pointed to the King’s Fund estimate that the £20 billion efficiency savings
represented a productivity gain of between 4 and 5% per year and that the payment by
results tariff assumed a 4% efficiency saving over 2011/12. In addition, a Health Service
Journal survey in April 2011 found an average 6% target and Monitor estimated that
NHS foundation trusts were aiming at a 4.4% reduction in operating costs in 2011/12.
NHSE reported that some foundation trusts had indicated their cost improvement plans
included significantly higher savings of up to 9%. NHSE provided details of a sample
of ten NHS foundation trusts’ plans showing savings against reductions in full time
equivalent posts. They also presented the results of a NHS Confederation Members’
Survey in June 2011 providing chief executives’ and chairs’ views on the serious financial
challenges.
3.53 NHSE commented on unavoidable pressure on NHS finances from increasing demands
for new technology, structural reform and productivity. They cited the Department of
Health impact assessment which put the total costs of the changes required by the Health
and Social Care Bill to be between £1,001 million and £1,478 million predominantly to
be incurred in 2011/12 and 2012/13. Employers told NHSE that they were concerned
about protecting front line services and about constraining pay costs within the tariff
particularly in the light of the in-built incremental cost which was accentuated by current
low turnover.
3.54 NHSE considered that the affordability of increases in earnings continued to dominate
the thinking of employers in the NHS in England. In employers’ view, the pay freeze
would not be sufficient to restrain pay bill growth and employment costs and further cost
reductions were required to protect jobs. NHSE added that cost pressures from increased
earnings from whatever source would not be affordable and savings would need to be
found elsewhere from efficiencies or reductions in service or both. NHSE estimated that
the incremental pay provisions in the AfC Agreement added around 2% to the pay bill of
NHS organisations in 2011/12 with a similar increase in incremental provision intended
for 2012/13. The £250 uplift added a further 0.4% to the pay bill for non-medical staff.
Staff Bodies
3.55 The Staff Side told us that there were mounting cuts to both services and jobs across the
UK. Funding for the NHS in England was to increase in real terms by just under 0.1% per
year until 2015 but with a target of £20 billion efficiency savings. NHSScotland faced a
real terms cut of 3.3% by 2011/12, Northern Ireland a real terms cut of 2.6% by 2014/15
and Wales a cumulative cut of 8.3% by 2012/13. The Staff Side felt that reduced budgets
were hitting staff through redundancies, vacancy freezes, down-banding, restructuring
and delayed recruitment.
3.56 The Staff Side pointed to the NHS in England recording a surplus of almost £1.5 billion
in 2010/11, or 1.5% of NHS resources, and the cumulative value of £7 billion over the
last five years. The collective position of foundation trusts was less transparent but data
provided to the House of Commons indicated that they enjoyed a further £669 million
surplus between 2007 and 2009. In Scotland in 2009/10 the NHS recorded a £42 million
15 Centre for Workforce Intelligence (8 July 2011), Nursing & Midwifery Workforce Risks and Opportunities. Available at:
http://www.cfwi.org.uk/intelligence/projects/workforce-risks-and-opportunities-nursing-and-midwifery.
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