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Select Committee on Health Third Report

FUTURE NHS STAFFING REQUIREMENTS

Private Finance Initiative

140. The Private Finance Initiative was introduced during the Autumn Statement of 1992. The aim was: "to find new ways of mobilising the private sector to meet needs which have only been met by the public sector."[172]Most of the current wave of capital investment in the NHS hospital sector is funded through PFI. The larger NHS PFI schemes[173] are all based on 'design, build, finance and operate' contracts under which NHS trusts receive the use of privately financed facilities and their associated services in return for a series of payments over the contract period. The capital for the investment is raised by the private sector and is repaid through the payments received from the NHS trusts. Eleven contracts have so far been signed for developments in England and Wales.

141. When we visited Birmingham we were told of the dissatisfaction felt by staff as a result of what they described as a management policy of adopting PFI proposals at any cost. There was a general perception that PFI and contracting-out created a situation giving primacy to profit rather than service. It was argued that the NHS ethos of teamwork would ultimately be eroded by the proposed PFI developments.

142. The NHS Confederation argued that PFI was equally unpopular with managers:

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143. The Director of Human Resources at NHSE told us that the Government would expect employers who took over as a result of PFI to adhere to terms similar to those previously provided.[175] Trusts would be required to enquire into the employment practices of the organisation as well as its proposed staffing policies.[176] The Government also wanted unions to let trusts have an assessment of the employers concerned.[177] The Director of Human Resources admitted that there was as yet no system of monitoring employment practices, but expected this would be given attention as PFI developed.[178]

144. In supplementary written evidence the BMA indicated its concern about the impact of PFI on the NHS. It said:

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145. Serving private capital investment carries a premium when compared with the standard capital charges levied for public sector capital investment. The question which needs to be asked - now informed by published business cases for PFI schemes - is where this premium is to be found. Given that the largest element of NHS expenditure relates to staff costs, one conclusion might be that PFI schemes are based on an assumption that a level output of services can be achieved with reduced staff costs whilst maintaining good employment practices. We have not seen evidence to support this assumption. However, healthcare delivery and its funding are dynamic in nature. It is conceivable that new facilities will lead to efficiencies in the use of staff but this cannot be guaranteed in advance. In the short term reductions in staff numbers would seem to staff themselves to be the immediate impact of the introduction of PFI schemes. We believe that further exploration of the impact of PFIs is required before significant levels of recurrent NHS funds are devoted to the servicing of the private capital involved.

146. An argument raised in favour of the PFI schemes is that non-clinical staff can be more effectively managed than is currently the case. This has been challenged on two counts. First, the division between clinical and non-clinical staff is artificial. Hospitals function best through integration of work of many different staff groups. Porters and cleaners as well as nurses and doctors need to understand the primacy of patient care in everything they do. A division in the management of clinical and non-clinical staff is unlikely to be conducive to high quality services to patients. We heard anecdotal evidence supporting this argument. Second, we have heard evidence from the unions representing both clinical and non-clinical staff challenging the assumption that dividing the management of these two groups does not achieve greater value for money. We are aware that in many cases headline cost savings from contracting out for non-clinical services appear to have been associated with deterioration in the conditions of work for the staff involved and with a consequential negative effect on staff morale.[180]

147. In oral evidence Mr Roger Kline of MSF declared:

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148. To say that there is no benefit to patients is probably an exaggeration, at least in the short term. The attraction of new facilities and state of the art provision to replace dilapidated premises and obsolete equipment, along with a means to supply them, can hardly be denied. The secrecy surrounding the PFI business plans and the resultant confusion has not helped persuade opponents of the schemes that there might be advantages albeit with certain modifications.

149. UNISON believed that inherent in the PFI schemes was the notion that staff were more efficiently managed in the private sector, but claimed that there was no evidence for this supposition.[182] At the moment staff described as non-clinical become eligible for transfer through PFI or compulsory competitive tendering. It was put to us that the clinical/non-clinical division would increase professional barriers. It was also argued that the distinction was often arbitrary and difficult to define.[183] Dr Bogle of the BMA agreed:

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150. Miss Christine Hancock thought that the NHS needed to be more clear about what its core business is before it transfers to a separate employer ancillary staff who work close to patients. She said:

"It seems to me a lot of what people call unclinical services are core businesses."[185]

Miss Hancock also expressed concern about the reduction in nursing staff based on the loss of beds inherent in the PFI schemes.[186]

151. The memorandum from UNISON called for the NHS to:

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and informed us that:

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152. PFI schemes are likely to have an impact on most of our inquiries and we intend to keep a careful and critical eye on a strategy that involves considerable public cost but whose advantages remain unproven. At the moment we remain agnostic about the long-term benefits of PFI. We do though regret the transfer of ancillary staff to the private sector that is currently a consequence of PFI. The often spurious division of staff into clinical or non-clinical groups can create an institutional apartheid which might be detrimental to staff morale and to patients. We believe the Government should limit PFI to a number of pilot schemes until a proper evaluation of the impact on staff and patient care is produced.

Pay

153. In its written evidence to us the Government rejected the view that pay was the sole issue in NHS recruitment and retention.[189] It argued that "the pay of health professionals over the last few years has grown ahead of average earnings."[190] Current assessments of average earnings were provided, along with the comment that:

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154. The RCN believed that poor pay and poor career prospects prolong shortages[192] and PAMs thought a pay increase would help low morale.[193] Mr Roger Kline of MSF suggested that unless "they can get their heads around pay...and that means a new pay system"[194] a question mark would remain over the Government's human resources strategy:

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155. Mr Abberley of UNISON told us:

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This lesson has been learnt. On 23 September 1998 the then Minister of State at the DoH launched a £50 million package to tackle nurse shortages. He said

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156. Justifiable concern was voiced over the worsening pay differentials for staff outside the remit of the pay review bodies[198] and the fact that currently those bodies were not required to consider or cross-reference each others' work[199] We were told by one witness that changing the pay system without the provision of adequate resources would be difficult.[200]

157. We have commented favourably on the Government's plans to reform the NHS, including their desire to secure a quality workforce. We note they are broadly welcomed by staff. The one obstacle to their swift and successful implementation was the inadequate and unrealistic levels of pay in the NHS. New buildings, improved management and high ideals would bear no fruit if incomes were too low to attract the numbers and quality of staff necessary to reduce undue workloads, diminish the consequent stress, and thereby improve patient care.

158. On 1 February the Government accepted the 1999 pay review bodies' recommendation of an above inflation pay award for all staff in the NHS amounting to a minimum 4.7 per cent for nurses, midwives, health visitors and PAMs and 3.5 per cent for doctors and dentists.[201] The starting pay for newly qualified nurses was increased by 12 per cent, a level that should help in the recruitment drive. It remains open to question whether the increased rates for other staff are sufficient to improve morale and to attract people back to the profession. We see this as the first step towards the Government showing commitment to staff and we welcome its stated intention to modernise the NHS pay system.[202]

159. The pay award for hospital ancillary workers has yet to be announced. In reaching its decision on this group of essential NHS staff we trust the Government will bear in mind the contribution they make towards patient care in the context of a unified team and the particularly low level of pay that many of these staff experience. We look forward to a generous settlement.

160. A new pay system is now necessary. The current method is unpopular and open to abuse by managers. In Darlington a radiographer expressed concern at the tension caused by 60 per cent of staff in her trust being employed on less favourable trust terms whilst the remaining 40 per cent were employed on Whitley terms. In Birmingham we were told that the present pay determination system was divisive and pitted one set of staff against another. The NHS Confederation believed that at present there was no "consistency of approach and evaluation between the various different professions"[203] and would welcome a new pay system which addressed the problem.[204] Acknowledging the complexities involved and the need for more work, we recommend that the time has come for the NHS to move towards a single pay spine for all personnel. Terms and conditions should be negotiated nationally.

161. In our view the development of the pay spine should have several components. It should demonstrate to the workforce equity and openness in the employment of staff; encourage trusts to be clear about local skill mix requirements, encourage shared learning, especially across relevant staff groups and encourage flexible education programmes.

The Pay Review Bodies

162. There are currently two pay review bodies, one for doctors and dentists and one for nurses, midwives, health visitors and PAMs. They were established in 1983 with a view to avoiding recurrent disputes between the professions and the health departments, ensuring fair levels of remuneration and safeguarding the interests of the taxpayer. Members of the bodies are drawn from a variety of different fields. They are appointed by the Prime Minister.

163. The review bodies report in January, allowing time for the Government to announce its decision on remuneration before employers prepare their budgets in the Spring. Recommendations are generally accepted, but there have been some exceptions. In 1993 the bodies did not report following the Government's decision to impose a 1.5 per cent pay rise on the public sector. In 1989 and 1990 some of the specific recommendations relating to doctors and dentists were rejected. Over recent years Government's have accepted the recommendations of the bodies but have staged the ensuing pay award.

164. The pay review bodies are required to take account of four key considerations: the need to recruit, retain and motivate staff, the health departments' output targets for the delivery of services, the funds available to the health departments and the Government's inflation target. They are also asked to consider economic and other evidence submitted by the Government, staff and the professions.

165. We think it is time now to reorganise the pay review body system in order to inculcate a greater sense of team spirit within the NHS. We therefore recommend its replacement with the establishment of a single body charged with the task of reviewing the pay of all NHS professionals. This body should have within its remit all NHS staff, for example, clinical scientists and ancillary workers, who are not included in the current pay review bodies. The independence of the body should be secure and unassailable.

Conclusion

166. The Government is on the right track for revitalising the NHS. But it needs to recalculate the numbers necessary to overcome staff shortages and carry out the proposed reforms. It should provide proper resources for the continuous learning process that modern health care demands. It should be extremely cautious in negotiations concerning the private finance initiative. Above all it should continue to provide salaries for NHS staff that are commensurate with the responsibilities involved.

167. The recommendations we have made in this report will cost significant amounts of public money. We are confident that the people of this country will support our conclusions and will be prepared to see them financed. Providing sufficient funds for the NHS and its staff under the banner of the pursuit of quality healthcare is an investment in the future.

172 Autumn Statement, 18 November 1992. Back

173 In this context "larger" is defined as costing more than £25-30 million. Back

174 Q282. Back

175 Q58 Back