Regional Pay (NHS)

Hugh Bayley Excerpts

Wednesday 7th November 2012 Commons Chamber

[Mr Hunt]

Perhaps the right hon. Gentleman will explain why he voted for the Health and Social Care (Community Health and Standards) Act 2003, which gave foundation trusts the freedom to introduce their own terms and conditions. Until he explains that, which we are simply supporting, I am afraid that his position is extremely tenuous.

[Hugh Bayley (York Central) (Lab)]

The NHS budget is actually going down. It is certainly much more constrained than it was under the previous Government, so if the Secretary of State accelerates the regionalisation of pay, it will presumably fall in low-pay areas such as mine in Yorkshire and rise in the leafy suburbs of Surrey, which he represents. Will the health budget then be transferred from poorer areas in the north of England to the high-pay places in the south?

[Mr Hunt]

Let me remind the hon. Gentleman that he supported the 2003 Act, which gave foundation trusts the power to set their own terms and conditions. Let me also remind him that this Government have increased the NHS budget in real terms—something that the right hon. Member for Leigh said was “irresponsible”. Let me say clearly that we are not changing the allocation of resources to different parts of the country, but we are allowing the flexibilities that the Labour Government introduced for local NHS managers to make sure that they get the benefit. If the hon. Member for York Central (Hugh Bayley) listened to what I said about a million more people being treated in accident and emergency, one and a half million more diagnostic tests being carried out, and about half a million more out-patient appointments being dealt with, he would understand that all our constituents are benefiting from that. That is because we have the flexibilities that that Government introduced.

--- Later in debate ---

[Hugh Bayley (York Central) (Lab)]

It would be a good thing, when debating the future of the health service, to talk a little more about the work done by health service professionals. If a woman has breast cancer and consults the oncologist, and he is working out what the best chemotherapy would be, she would want him to be as well qualified and skilled whether he lived in Plymouth or in a part of the country where wage levels were higher. She would expect her doctor to be as well remunerated. Exactly the same would apply for a nurse planning a care and rehabilitation regime for an elderly stroke victim. A number of colleagues made the point that a nurse in Plymouth should get the same rate of pay as a nurse in the City of London. The reason why they should receive the same rate of pay is that we, as their patients, want the same level of care, the same level of service and the same likelihood of survival if we have an illness.

My remarks are based on my experience before I joined the House. We heard a number of Conservative Members trashing the trade unions. I spent seven years as a full-time trade union official for the National and Local Government Officers Association, now part of Unison, negotiating pay and conditions in the national pay bodies for nurses, midwives, ambulance officers, and administrative and clerical staff. I put the interests of the health service and patients very high on my agenda when I did that job. I spent a number of years as a health economist, working at the university of York, advising health authorities and trusts on how best to use their budgets. I spent time as a member of York health authority—they were called health authorities in those days—which would now be the equivalent of being a non-executive member of a trust board. Before the debate, I consulted senior NHS managers, finance directors, chief executives, a trust chair, and Professor Alan Maynard, a professor of health economics who was an adviser to the Health Committee, and my remarks reflect what they told me.

I can tell hon. Members from real experience that negotiating pay and conditions is a slow, painful and labour-intensive task. There is an opportunity cost. If health service managers spend time determining pay on a regional or local basis, that removes them from focusing on something else—driving up productivity, improving care outcomes or developing new prevention services, perhaps. There is a cost if more effort is put into regional pay negotiations, because less is done on something else. Regional pay would divert hundreds of managers from thousands of hours of managing the health service into doing something that they currently do not need to do. The Labour Government permitted a measure of local flexibility, but we specifically did not go for the introduction of regional pay.

[Dan Rogerson]

The other approach that, unfortunately, the consortium seems to have taken is putting aside money and employing consultants to come up with a model for it. That has the potential to be even worse than the approach the hon. Gentleman describes.

[Hugh Bayley]

I am grateful to the hon. Gentleman for enhancing my argument. As has been pointed out, the limited flexibility that was introduced by the Labour Government has been used by only one hospital to date, Southend, and in that case it was to raise, not reduce, pay.

Abandoning a national pay framework for the NHS is likely to be inflationary for NHS pay. Let us start with doctors. We know from experience that doctors are tough negotiators—[Interruption.] I can see the Under-Secretary of State for Health, the hon. Member for Central Suffolk and North Ipswich (Dr Poulter) smiling. When GPs were negotiating with the previous Labour Government about the cost of the change in out-of-hours services, they—let us be blunt about it—did extremely well out of the agreement. Why did they do well? Because they have immeasurably high leverage. If they were to withhold their services, in whole or in part, from patients, the consequences would be dramatic.

If we had regional pay, the charge would be led by groups, such as doctors, in the highest-cost areas such as London, and they would be in a position to leverage large increases in pay. What would then happen? Doctors would inevitably be drawn away from areas of the country where they are paid 20% or 30% less. What would happen in an area such as mine, which would lose doctors to high-cost areas in London and the south-east of England? Of course, my area would have to raise pay to attract people back. There would be a general pressure, raising wage costs across the NHS, not just in the medical profession, but in other health professions too.

If the Department of Health loses control of pay in the NHS, which accounts for 70% or 75% of its budget, it would blow the Nicholson challenge straight out of the water. The Government have set the NHS the challenge of finding £20 billion of efficiency savings. If regional pay is introduced, they have no prospect whatever of achieving that because of the inflationary pressures of the change that they are making. Fragmentation and liberalisation of pay regimes only reduce pay where there is a surplus of labour—where the employer has the economic power and the leverage.

The health professions are highly regulated, however, and the professionals are extremely skilled workers who train for a long time, which makes it an inflexible labour market, and that gives health professionals immense bargaining power—a power that, as we know from experience, is used. If the Government really want a levelling down of pay in the NHS, they should train more doctors, nurses, physiotherapists and radiographers, so that there are 10% more than we need, which would have two advantages: first, the NHS could get rid of poor performers, and secondly, there would not be the same inflationary pressure on pay.

If we had regional pay variations, there would be an impact on quality of care in those regions that paid less, because the best clinicians would go to the best jobs paying higher salaries in high-cost areas. It would inevitably divert resources from poorer regions of the country to richer regions, which would fly in the face of the “No Stone Unturned” plan for growth produced for the Government by Lord Heseltine.

I want to respond briefly to the Secretary of State’s statement that under this Government spending on the NHS has increased in real terms. If he or other Members were to consult Her Majesty’s Treasury’s public expenditure statistical analyses of 2012, in table 1.8 they would find that expenditure on the NHS in 2009-10—the last year of the last Labour Government—at 2011-12 prices was £105.1 billion. In 2011-12—the first year of the coalition Government—it fell to £104.4 billion, and last year to £104.3 billion. That is a real-terms reduction in expenditure on the NHS. In comparison, under the Labour Government, we had on average a 6.2% increase each year. That shows why the NHS is in such a parlous financial position now.