Public sector pay increases, including for NHS staff, have been capped at 1% since 2013–14 and for two years prior to that subject to a pay freeze affecting the majority. NHS employees' pay fell by 10 per cent in real terms between 2009/10 and 2014/15 and continues to fall.
It is time in my view for pay restraint to be loosened but that cannot be done without a clear plan for how it will be funded.
In 2015–16, the Department of Health spent £48.7 billion on NHS provider staffing costs. The IFS estimates that each 1% increase in staff pay would add approximately £0.5 billion to the pay bill, just for the NHS. This means either additional funding for the service or painful reductions in other areas of the NHS or DH budget.
I agree with the pay review body that there are also costs in ignoring the need to increase pay. As the gap between NHS pay and jobs outside the public sector widens, this is hitting the recruitment and retention of key staff, especially when there is fierce international competition for skilled healthcare professionals. The fall in real incomes is also affecting morale, especially where staff are having to work under greater pressure to compensate for unfilled posts. Vacancies and staff shortages can also affect patient safety as well as lead to higher agency costs. Pay restraint is becoming a false economy.
For all these reasons I believe it is time for a rethink but it will require a clear plan from the Treasury as to how it will be paid for. Ending the pay cap won't happen through a simple amendment to the Queen's speech.
It is essential for all Political Parties to face up to the scale of the funding challenge across the NHS and social care and to work together to find a way forward. The reality is that the wider challenge in funding these vital services, in the face of an extraordinary increase in demand and costs, will be there for which ever Party is in Government after the next election. It is in everyone's interests for MPs to work constructively together across Party lines in the national interest. We have a responsibility to level with the public and with each other because the reality is that we are all going to have to pay more to put the NHS, social care and our other valued public services on a sustainable long term footing.
Much of the ground work has already been carried out and we should look again at the full range of proposals from the Barker Commission and the House of Lords inquiry into the sustainable long term funding of the NHS and social care.