NHS workers lose £647 in year 1 of ‘efficiency’ – FTN wants freedom to cut more without negotiation

I’ve spent the last few days looking through the oral testimony given to the Commons Health Select Committee on 13 November, as well as through the lengthy written testimony given to the committee ahead of the hearing by various organisations, on ‘public expenditure’ – basically the state of NHS finances and the progress toward achieving the ‘Nicholson Challenge’ of £20 billion in savings over the period from 2011-2015.

I was initially drawn to this evidentiary session because, among the witnesses, was Tony Spotswood – the CEO of Royal Bournemouth and Christchurch NHS Trust. Spotswood, as revealed in an email exchange I was able to publish for the first time recently, discussed a ‘coup’ plan to bring down the ‘NHS Employers’ organisation (NHSE) with Chris Bown, CEO of the neighbouring Poole NHS Trust.

NHSE is responsible for national negotiations with unions on the pay and conditions of the UK’s 1.7 million (and falling under this government) NHS workers, while Bown and Spotswood were both involved in the South West Pay Terms and Conditions Consortium (SWC) – an admitted cartel formed with the aim of forcing cuts in pay and conditions on NHS staff in the south-west region.

The witnesses also included Chris Hopson, the recently-appointed CEO of the Foundation Trust Network (FTN) which, despite its name, includes all kinds of ‘public provider’ NHS Trusts, and not just FTs. Spotswood’s and Bown’s emails indicated that the FTN is fully and openly supportive of the SWC’s attempts to force regionally-lower pay on NHS workers, so I was very interested to see what they would say to the committee of MPs on their activities.

What they said and wrote to the Select Committee was very revealing about the real aims and mores not just of the SWC but of the FTN’s board toward our hard-working health-workers. But there was some other information, from other witnesses, that provides critical context for understanding just what kind of treatment and attitudes our doctors, nurses and other NHS staff are being expected to accept while continuing to save lives and maintain (and even improve) standards of care.

The cost so far – and we’ve barely started

I’ll address the SWC and FTN culprits’ evidence in a moment, but first I want to look at statements by Sir David Nicholson – the author of the ‘Challenge’ – and David Flory, respectively the Chief Executive and Deputy Chief Executive of the NHS. These statements provide a concrete indication of the extent of the cuts that have already been forced on our NHS workers.

The Chair of the committee asks Sir David to clarify how much of the £5,8 billion of savings in year one of the Challenge were down to pay, leading to the following exchange:

Sir David Nicholson: £850 million.

Q126 Chair: So virtually £5 billion is unrelated to pay.

Sir David Nicholson: No. There are other savings that we have made in relation to pay. For example, there is the general productivity and efficiency savings that some of our colleagues talked about. An element of that is pay. There are the significant reductions we have had on agency spend in the system and the reductions in sickness absence. All of those things attach to pay. We have also had a reduction in pay drift, the expected pay drift that you might get in a system, which again has all added to a figure which is probably £1.5 billion altogether.

Chair: So £850 million is simply pay rates not going up as fast as they previously would have done.

Sir David Nicholson: Yes, that is right.

And another £650 million is attributable to slower grade drift. Is that what I heard?

David Flory: The £850 million is essentially the avoidance of what we had assumed would otherwise have been a 2% pay award. So that is £850 million. On top of that, the evidence of reduction in agency spend is somewhere in the order of £240 million in 201112. Reduced expenditure due to reduced levels of sickness among staff is £160 million. Then, the number that we do not have such a precise analysis of, but we can see evidence of coming through in a number of local plans, is the point Sir David makes about managing a reduced rate of increase in pay drift which we have seen each year.

I’ll sum up: of the £5.8bn, £1.5bn is related to pay. Of that £1.5bn, around £400 million is because of reduced spending on expensive agency staff and £160m in reduced sickness absence. That leaves £1.1 billion that would have been spent on staff salaries and wasn’t.

According to the NHS website, the NHS currently employs around 1.7 million people. The ‘economy’ of £1.1bn on pay means that, in the first year of the ‘Nicholson Challenge’, NHS staff have already borne an average loss of just over £647 each.

The news gets worse. £647 loss in income is a substantial sum for most people, and if that was all that was going to happen it would be bad enough. But according to the evidence given to the Committee…

We’ve barely even started yet

The written evidence submitted to the Committee by the FTN states:

60-70% of an average Trust’s costs are spent on pay bill and greater flexibility and scope for innovation around terms and conditions of employment are essential if further efficiency savings are to be realised

and

We expect our current survey to confirm our view that the two key strategic issues facing NHS Trusts in their ability to generate significant further efficiency savings longer term are service reconfiguration and staff terms and conditions

Hopson’s evidence indicates that the ‘easy’ savings have all been made. The only two options remaining for further savings are ‘service reconfiguration’ – ‘streamlining’ (i.e. reducing) services to patients – and cutting staff terms and conditions, which is primarily pay.

This is corroborated by the written statement from the NHS Confederation:

Good progress has been made in meeting the ‘Nicholson challenge’. However, NHS leaders tell us that the efficiency savings which have been delivered so far are predominantly the ‘quick wins‘

In other words, ‘We’ve hardly begun on staff pay yet‘. This fits with the aim, made public but in a veiled form, of the SWC cartel: to cut over £1,600 per year from staff pay each year until at least 2015.

Yet now we see that, just as Bown and Spotswood indicated in their email exchange, the FTN is fully supportive of the SWC’s aims for the South-West – but not just for the South West:

Local ‘flexibility’: everywhere

The FTN envisages recreating the SWC’s cartel-like behaviour on a national scale, to achieve the further cuts of £15 billion still to be implemented for the £20bn Nicholson Challenge. In his already-mentioned email, Tony Spotswood indicates a ‘wider [FTN] agenda‘ of having a national group of regional consortia (read cartels) ‘displacing NHS Employers‘ – the body responsible for national negotiations on staff pay and terms, and discusses how this might be achieved.

The FTN’s written evidence to the Committee is fully in line with this ‘wider agenda’:

Again, in a recent FTN survey, members were unanimous that reform to pay, terms and conditions is now essential for Trusts to stay within their financial envelope.19 There is a
strong belief across all Trusts that the current national pay system is too rigid and can no longer adapt sufficiently to reflect financial and service challenges.

Spotswood’s and Bown’s emails from September alluded to a ‘wider agenda’ within the FTN to depose NHS Employers as the body responsible for national pay rates in order to achieve ‘rubber-stamped’ regional flexibility. Now, in formal, written evidence to a Parliamentary Select Committee, the FTN essentially confirms its desire to shatter the national framework. But that’s not all:

What do you give the Trust that has everything?

This passage from the oral evidence is quite long, but I ask you to bear with it and read it from start to finish, because not only does it give a flavour of the evasiveness and double-speak typical of the whole series of responses given by 4 highly-paid NHS chief executives to an official committee of MPs, but it also gives a chilling insight into the scale of ambition and depth of callousness of the FTN’s CEO:

Andrew George: Coming to the question of bearing down on costs, I noticed in paragraphs 20 to 27 of your supplementary evidence that you particularly emphasise that the biggest pressure is pay, and that clearly comes out. Given, as Barbara has said, that we are debating very keenly the politics as well as the practicalities of the potential threat-or the opportunity, depending on which way you see it-of regional pay, or various ways of bearing down on pay costs, I wanted to be very clear and, if I could, Chris, ask you first what freedoms you believe you have under present legislation to step outside the Agenda for Change arrangements and to use employment law, as I understand the 20 trusts in the south-west are looking at doing, to offer a different arrangement in terms of pay for all levels of staff? Do you understand that under legislation for foundation trusts you have greater freedoms to use those flexibilities to offer something outside the Agenda for Change agreement?

Chris Hopson: We were very struck by the results of another survey we did of our members about three or four months ago. You are always interested when you get a survey answer that comes back with every single trust agreeing, but what was interesting was the question that was asked was, “Do you want more flexibility than the current agreements allow?” Every single trust came back and said, “Yes, we do want more flexibility.” The issue is that there are differing views among our members about what is the best way of achieving that…but there are a number of trusts which feel that, taking a three or four-year view, they are going to need to go substantially further, which is why you have seen a number of different trusts-and obviously being a south-west MP you will know the south-west consortia are-looking at how they might band together and how they then might use alternative ways of gaining that flexibility.

Andrew George: That is using existing flexibilities. Your question is, “Would you like more flexibilities?” Are they aware of the flexibilities that they have at present, which clearly the 20 trusts in the south-west believe that they have, otherwise they would not be spending so much money and effort looking at how to exploit those flexibilities now?

Chris Hopson: There are a number of different ways that you might go about this. You have already talked about the fact that one trust is looking at the idea effectively of making its work force redundant and coming back with a new set of terms and conditions. The south-west is still at relatively early days. It seems to me that it is saying NHS trusts would like to have the opportunity that virtually every other employer has had over the last two or three years of having a dialogue with its work force about how to ensure improvement in the quality of service and also balance that off against work force costs.

One of the things I find slightly frustrating is that there is a natural assumption that that debate will end up in something that necessarily harms the work force. There are plenty of employers over the last three years who have had a debate with their work force and said, “We are willing to trade off, for example, an employment guarantee going forward, for a change to terms and conditions.” So I think it is important not to prejudge what the results of those conversations might be.

Andrew George: But my question is really a legal one. I am asking you about the legislation as it applies to foundation trusts. As the Department has explained it to me, I understand that existing legislation provides for freedoms for foundation trusts to negotiate outside Agenda for Change, to use employment law to renegotiate with their staff a different set of conditions outwith Agenda for Change. That is a freedom which currently exists and they can exploit if they choose.

Chris Hopson: As I understand it, it does not just apply to foundation trusts. It applies to all trusts.

Chair: So when they ask for more flexibilities, what do they have in mind?

Hopson then starts to give such a vague, circuitous non-response that the Chair cuts him off:

Chair: I am sorry, but it is a very precise question. If the legal status already allows them the same freedom as any other employer within the terms of employment law, what more flexibility do they want?

Chris Hopson: They want the ability to have discussions separate from the national agreement to basically talk to their staff about different terms and conditions.

Chair: The advice is that they have that freedom.

Chris Hopson: Yes and therefore they are in the process of gathering together to see how they exercise that freedom. Tony, you are probably better placed than I to answer. Do you want to give your perspective?

Desperate not to have to give a direct answer to a very clear question, Hopson palms it off to Tony Spotswood – who talks in vague terms about the SWC but also fails to give a clear answer. The questioning then switches tack to a completely different topic, so that the evasive respondents get away without actually answering the question. You can almost hear their collective sigh of relief.

But the answer is there, nonetheless, if you read carefully enough. Pressed on the matter, Hopson admits that the Trusts – as announced in Parliament by then-Health Secretary Andrew Lansley just before he was sacked – are allowed to implement different pay and conditions locally. But Lansley said something very important:

Although they [NHS employers] are free [under the Health Act 2006] to opt out of the national pay framework, they cannot do so unilaterally; they must consult and seek agreement with their staff and representatives…

‘They cannot do so unilaterally‘. As Andrew George states, “existing legislation provides for freedoms for foundation trusts to negotiate outside Agenda for Change, to use employment law to renegotiate with their staff a different set of conditions“.

Under existing legislation, Trusts have the freedom to suggest different terms to their staff – but to actually implement the changes, they have to achieve agreement.

So, if the FTN wants more flexibility, in spite of Hopson’s unwillingness to actually say so on the record yet, this can only mean one thing: they want the freedom to be able to impose changes without agreement. He touches on one way this might be achieved when he mentions some Trusts dismissing and re-engaging employees on different terms. But it’s plain that his ambition goes further – he wants political support and the implementation of legislation that will allow Trusts to unilaterally change pay and terms, and to present the changes as a fait accompli to staff and their unions.

There is much more worth noting in the written and spoken evidence discussed in this committee hearing on 13 Nov, so there will almost certainly be a ‘part 2’ of this post, but for now I think I’ve given you enough to digest so I’ll stop here and let you think on this fact:

The FTN, an organisation that has an agenda to overturn the formal, acknowledged structure of NHS governance and pay negotiation, intends a massive, prolonged and nationwide attack on the pay and conditions of our doctors, nurses and other health-workers – and wants ‘special’ freedom to be able to just go ahead with it without the agreement with unions that even the lamentable Health and Social Care Act 2012 requires.