Pay awards to be funded in full by diverting centrally held budgets

Earlier this week, the Department of Health and Social Care accepted the pay review bodies’ recommendations, which will increase the agenda for change pay bill by 4.8% in England, Wales and Northern Ireland. However, until now, the NHS in England has been funded only for an increase of 3%.

Earlier this month, Mr Kelly (pictured) said each additional 1% would cost the NHS £800m to £1bn.

In a letter to finance directors, Mr Kelly reiterated NHS England’s stance that it was right to reward frontline staff, and that it was an operational necessity to retain staff to continue to reduce the Covid-19 backlog and respond to significant operational demands.

Systems and providers will be funded in full for the pay award with an additional allocation on top of the existing budget. He said this would allow frontline organisations to focus on operational demands, including urgent and emergency care and Covid recovery. He confirmed the commitment to reducing agency staff spending, with ceilings set at system level.

Systems and NHS England commissioners will be allocated around £2bn extra to cover the additional cost of the pay awards over and above the 3% level included in the existing allocations, he said. The organisations are expected to reflect this increase in their contracts with trusts by uplifting tariff by 1.7%.

The additional allocation also takes account of the increased cost of services from non-NHS providers, and the extra cost of providing education and training, he added.

However, diverting funding to commissioners for pay and other costs will require NHS England and the Department to take funds from national budgets, including technology programmes. Details will be provided soon.

Continued focus

Mr Kelly added: ‘These savings will allow the NHS to focus on frontline patient care this year but will impact on the ability to deliver on specific plans and goals. We will reflect on these additional factors with government as we continue work to update the long-term plan over the summer.’

He also said NHS England will continue to work with the service to improve capacity and support performance and patient flow. There will be a particular focus on reducing ambulance delays and long waits in emergency departments ahead of the winter. Funding and plans to support these programmes, including virtual wards, will be confirmed in the coming weeks.

The NHS must concentrate on recovering Covid backlogs in mental health services, using funds from the mental health investment standard and transformation funding, as well as cutting waiting times to meet elective waiting targets, he said.

Miriam Deakin, interim deputy chief executive of NHS Providers, said it was disappointing that technology schemes would have to be pared back, limiting the ability of the NHS to improve care and meet patients’ needs as planned.

‘Diverting nearly £2bn of essential NHS funding because government has chosen not to fully fund the NHS pay uplifts means that the NHS has even less money to deliver on long-term plans and ambitions. It isn’t possible for trusts to find more efficiency savings on top of already stretching targets, so this will hit patient services.’

She added that NHS England has already redirected £1.5bn to account for inflation in 2022/23 and had to absorb extra costs for Covid testing. ‘All of this means less money for other priorities right across the health service, and will hamper trusts’ efforts to tackle backlogs and improve cancer care.’

NHS Confederation analysis said the service faces a real-terms funding cut of between £4bn and £9.4bn this financial year. The figure depends on whether the GDP deflator or the consumer prices index is used as a measure of inflation. As well as pay, rising inflation and ongoing Covid costs were reducing the real value of the NHS budget, it said.

It was one reason why the NHS was required to make efficiency savings of 2.2% and ‘a far cry from the planned 3.8% annual real terms increase in NHS funding up to 2024/25, which was outlined in the government’s spending review last October’.