House of Commons Hansard Debates for 20 Apr 1995

The Parliamentary Under-Secretary of State for Scotland (Lord James Douglas-Hamilton): I congratulate the hon. Member for Moray (Mrs. Ewing) on securing this debate on the Adjournment. She has been assiduous in her concern in this area, and she recently secured another Adjournment debate about community care.

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I welcome the opportunities that the debate offers, not least because it allows me to acknowledge the valuable work performed not only by nurses, midwives and health visitors, but by all those who work in the national health service in Scotland. I pay tribute to their commitment. A very distinguished hospital, the Western general, is located in my constituency. It is involved with many areas of specialist care and I am full of admiration for the work that is performed there. The Scottish Office fully recognises that fact also.

As the hon. Lady will no doubt be aware, we allocate £4 billion per year to funding the national health service in Scotland. It represents almost one third of the resources available to the Secretary of State for Scotland and provides clear evidence, if such evidence is required, of the importance and the priority that the Government continue to attach to the provision of health care services.

Since 1979, we have increased the annual level of resources available for the NHS in Scotland from £1 billion to today's figure of £4.1 billion. That represents a real-terms growth of more than 53 per cent. and, despite competing financial pressures from other quarters, the Government have continued to honour their 1992 manifesto pledge to a year-on-year increase in the level of real resources committed to the national health service in Scotland. As I just stated, for the first time, net expenditure on the NHS in Scotland will exceed £4 billion in 1995-96. In broad terms, just over £1 billion will go towards family health services and centrally funded services, but by far the largest element--just over £3 billion--will go to hospital and community health services. Some £2.5 billion of that £3 billion has been allocated to health boards through a standard and long-accepted weighted capitation formula. In essence, the formula weights individual health board populations for age and sex, relative health care need and geographical differences in the costs of providing services. The aim is to ensure that, across Scotland, there is equal opportunity of access to health care for people at equal risk.

By now, in respect of 1995-96, most of the £2.5 billion allocated to health boards--as purchasers of health care services--will be committed to NHS trusts--as providers--through service contracts. The trusts' contract prices will, of course, include provision for pay together with the trusts' other operating overheads.

On whether health boards--and hence the NHS service as a whole--have sufficient resources to meet possible pay awards, the short answer is yes. The total resources available to health boards through their general allocations and expected cash-releasing efficiencies are, as I have just said, £2.5 billion. That is an increase of just under £130 million or 5.4 per cent. on their 1994-95 provision. Those additional resources are required to meet the cost implications of demographic change, medical advance and, of course, pay and price increases.

The Government's policy is that public sector pay must be met from within efficiency gains.

Mrs. Ewing: I hear all that the Minister is saying in the context of those complex figures, but, basically,

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does he believe that throughout Scotland every worker--nurses, midwives or health visitors--should have access to the same pay increase? If that does not happen, how does he intend to cope with the fact that nurse will be set against nurse and trust against trust?

Lord James Douglas-Hamilton: I shall explain the Government's position exactly. The hon. Lady asked specifically about guidance. The management executive of the NHS in Scotland will issue guidance to the trusts on local pay within the next week and that will encourage the trusts in Scotland to make offers and point out the review body's anticipation that increases will range between 1.5 per cent. and 3 per cent. I shall return to that in more detail in a moment.

Health boards have been set a minimum cash-releasing efficiency target of 2.75 per cent. for 1995-96. That equates to some £70 million, which in itself amounts to just over 4 per cent. of the estimated pay bill for 1994- 95. An element of that £70 million will be required to meet demographic change, medical advance and general price increases, but with total additional funds of almost £130 million in 1995-96, health boards have been given sufficient resources and have sufficient flexibility within those resources to budget for and meet all potential cost increases.

I now refer to the actual pay awards for nurses, midwives and health visitors. Recommendations on their pay are made by an independent pay review body, as the hon. Lady appreciates. For 1995-96, the review body recommended a two-tier approach, comprising a 1 per cent. increase in national salary rates and local negotiations on pay and/or conditions.

The Nurses and Midwives Pay Review Body recommended that 1 per cent. increase, as I mentioned. The review body also recommended further local negotiations on pay. Both national and local increases are to be effective from 1 April 1995. On local negotiations, the review body did not prescribe an upper limit--and that is most significant--but it expected that in the majority of cases, the outcome of local negotiations plus the 1 per cent. increase in national rates would provide improvements for the staff concerned, totalling between 1.5 and 3 per cent.

Regarding those local negotiations on pay, it is of particular note that Whitley councils, representing all the 40 per cent. of NHS staff not covered by review bodies, have already accepted a provision that enables an element of their pay to be determined locally. The review body believes that trusts should be able to reach agreements in local negotiations. It did not prescribe an upper limit, but expected that in the majority of cases the outcome of local negotiations plus the 1 per cent. increase would provide improvements totalling between 1.5 and 3 per cent.

It must be made clear that the review body is quite independent. Let me also make it clear that the Scottish Office and the Government hold nurses, midwives and health visitors in the very highest regard. It was largely because of that regard that we set up their independent review body in 1983 and we have accepted its recommendations every year since.

If one went entirely by the coverage of the matter in the media, the impression would be gained that the figures in the

recommendations were somewhat arbitrary and that they suddenly emerged in the public domain

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from nowhere and without any basis. I am therefore glad of the opportunity to dispel misconceptions and mythologies. The best way of doing it is to draw attention to the facts.

This year, the review body again considered the main issues that had influenced its recommendations in previous years. Those issues are: first, the need to recruit and retain sufficient staff of the right quality in the long term as well as the short term; secondly, the need to maintain their morale and motivation at levels necessary to secure provision of the level and quality of service required; thirdly, the need for nursing, midwifery and health visiting staff and the public to feel that the nursing staff had been treated fairly; and fourthly, the need to avoid imposing an unfair burden on the taxpayer. The review body explained that those issues continued to be important to it as indicators of the adequacy of pay levels for nursing staff overall.

Evidence on those issues was submitted to the review body by the Health Departments, including the Scottish Office Home and Health Department. Evidence was also submitted by the staff side of the Nursing and Midwifery Staffs Negotiating Council and other individual staff organisations, such as the Royal College of Nursing, the Royal College of Midwives, the Scottish Health Visitors Association and Unison.

For its present report, the review body made a number of visits to hospitals to see the work of staff on whose pay it makes recommendations and to listen to their views on pay issues and related matters.

All those issues, as well as local pay, were carefully considered by the review body before it reached its conclusions and made its recommendations.

We fully accept the review body's recommendations. I regret talk of industrial action, as we all do. It is singularly regrettable that such talk has arisen simply because the Government have again accepted the recommendations of the independent pay review body. There is nothing unusual in the Government having accepted the recommendations. We have accepted all the previous recommendations, which have resulted, for example, in nurses' pay rising in the past six years by 78 per cent. compared with some 48 per cent. in the private sector and 49 per cent. in the whole economy. Recognition also needs to be given to the fact that in seven of the 11 years since they have had an independent pay review body, nursing staff's pay awards exceeded those for doctors and dentists.

In accepting the current recommendations, the Government recognise that the way forward is through local negotiation. The way for nurses, midwives and health visitors to achieve fair pay increases that reflect their value to the NHS is through local negotiation, not confrontation. At the same time, local pay is a vital part of achieving a more efficient NHS, much better at responding to the needs of patients.

Mrs. Ewing: I think that we all accept the importance of the review body--no one is arguing against its retention--but surely even the Government must recognise that we are talking about the first report out of 11 that has been rejected by serious organisations. That must cause some concern, even on the Treasury Bench.

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The Minister mentioned the motivation and morale of staff. I have never found motivation and morale lower. I say that having read speeches that I made in the House in March 1979 in the days of the Labour Government, when there was an argument about whether to establish a review body.

The Minister talks about the need for local negotiation. Is he prepared to say clearly that in no circumstances will local conditions be attached to pay negotiations in future? That is one of the strongest fears within the nursing profession and all the other professions that are involved in the discussion.

Lord James Douglas-Hamilton: I cannot say to the hon. Lady that there will be no variation anywhere within Britain.

The hon. Lady talked about the weighted capitation formula and whether the area that she represents has been properly treated. It has. There is no question of Grampian health board having been unfairly treated or disadvantaged in the 1995-96 allocation round. Mrs. Ewing rose --

Lord James Douglas-Hamilton: I shall continue with the point that I was making; the hon. Lady may intervene again in a moment. In keeping with normal practice, the health board's general cash allocation has been calculated on a weighted capitation formula. In short, the formula determines the board's target share of national resources that are available on the basis of its relative need for funds. That relative need is determined by taking account of the age and sex composition of each board's resident population and, most important, the relative health needs of the population group. The measurement used for determining health need is the standardised mortality ratio for those under 65 years. That, in effect, acts as a proxy for morbidity by contrasting the number of actual deaths in a board area within that age group with the expected number of deaths. The average standardised mortality rate for Scotland is set at one, and Grampian's rating is 0.82. In other words, the population in Grampian is presumed to be healthier than the national average. That is why the board received not its 10.1 per cent. pro rata share of Scotland's general allocation provision but a target share of 9.36 per cent. Despite that, over the past three years the board has continued to receive an allocation increase above the national average percentage increase for 1995-96. That has been worth almost £500,000.

Mrs. Ewing: I accept that vital factors work in Grampian. Has the Minister, however, or anyone within the Scottish Office, when deciding the allocation of funding, considered referral rates from, for example, West Unit as it was previously called? I know that many general practitioners in the area that I represent have not referred patients to Aberdeen royal infirmary or to Raigmore. They prefer to keep them at home and within travelling distance to monitor them for 24 or 48 hours. That has led to a non-recognition of the additional burden that GPs have taken on in rural areas such as my constituency.

Lord James Douglas-Hamilton: In terms of capitation, the health needs of Moray, considerable as they may be, must properly be taken into account. I shall certainly examine the detailed point that the hon. Lady

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has made and write to her. However, if we take the west central belt of Scotland, a part of which the hon. Member for Greenock and Port Glasgow (Dr. Godman) represents, we see that health needs indicators are higher than in the hon. Lady's constituency. The Scottish Office is properly entitled to take that into account in the allocation. I must stress that allocation is carried out strictly according to formula. It is not done at the discretion of Ministers. The Scottish Office follows the formula that is laid down. A strong motive in our NHS reforms is that, the nearer to patients decisions are taken, the better they are likely to be. We believe that that also applies to pay. It is our view that responsibility for devising pay arrangements should, like other aspects of management, be delegated wherever possible to those who are responsible for the delivery of services. It is for that reason that the Health Departments submitted evidence to the review body not to recommend an across-the-board increase.

We suggested that, instead, the review body should assist in the introduction of local arrangements by leaving employers with maximum scope for local action. By providing for a degree of local negotiation, the review body has endorsed and encouraged the aim of introducing local pay into the NHS. I hope, therefore, that nurses, midwives and health visitors will participate fully in the local negotiations to secure pay settlements that are both entirely fair to them and affordable to their employers: I stress, both fair and affordable.

I fully expect NHS employers in Scotland to approach the local pay negotiations in a responsible manner. The local pay increase must be seen to be fair. Local pay is not about delivering very low pay awards. That would be rightly regarded by staff and the public as unfair.

Public perception of the pay of nursing staff was one of the matters taken into account by the review body. The issues of fairness and comparability were considered. In doing so, it commented that there is a wider sense in which the pay of nursing staff should be "felt fair" by the community as a whole, as well as by the staff themselves, and that is central to the job that the review body is required to do. The issue was therefore considered by the review body, and that informed its recommendations.

While the local pay increase must be seen as fair, it must also be affordable. This issue was addressed by the review body, which recognised that where some element of pay is determined locally, affordability for pay purposes will also need to relate to the financial circumstances of individual trusts. In these circumstances, affordability will be influenced by trusts' success in negotiating contracts with purchasers, including some outside the NHS, as well as by their ability to control their costs.

How should this matter now be taken forward? At national level, talks are continuing in the Nursing and Midwifery Staffs Negotiating Council on an agreement that would promulgate the 1 per cent. increase in national salary rates and facilitate local negotiations on the additional payments.

At local level, the vast majority of NHS trusts in Scotland have concluded their discussions with various NHS purchasers regarding the costs and quality of service that they wish for 1995-96. Trusts in Scotland can now ascertain their income for 1995-96, and I expect them to

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engage in local negotiation with bodies representing staff on the implementation of the review body recommendations. The outcome of the negotiations in any particular trust will be a matter for that trust and its respective staff interests.

I appreciate that there are anxieties and fears, which is only natural when there are changes to pay determination mechanisms. Having to negotiate locally on an element of pay is a challenge, but it should also be regarded as an opportunity.

Concern has been expressed in some quarters about the readiness of the service to take on the job of local pay bargaining. The review body explained that it understood and had some sympathy with that concern. It concluded, however, that the necessary confidence and expertise will be fully developed across the NHS only when the parties are confronted by the actual process of making local pay arrangements. That is what the service, management and staff representatives alike now need to do.

Implicit in all that I have said is that pay is not an end in itself. That is well known to all those who work in the NHS in Scotland, where the objective is to deliver the highest standard of patient care.

Mrs. Ewing: I shall not reopen the argument about the establishment of trusts--that argument is in the past. Is the Minister convinced that the trusts, which are essentially in their infancy, are capable of negotiating and dealing with issues such as pay and conditions for their staff?

Lord James Douglas-Hamilton: Yes, I am. I should take the opportunity to say that in terms of funding generally in Scotland, health expenditure is 23 per cent. higher per capita in Scotland than in England. That is significant. The boards in Scotland have substantial resources and I would expect them to deliver awards that are both fair and affordable taking all the relevant circumstances into account.

This has been a useful debate and it has been good that so many hon. Members from Scotland have attended, including my hon. Friend the Member for Aberdeen, South (Mr. Robertson), who is keenly interested in the matter, and the hon. Members for Angus, East (Mr. Welsh) and for Greenock and Port Glasgow.

I should like to make several points to draw the strands of the debate together. Since 1979, resources available to the NHS in Scotland have grown from £1 billion to £4.1 billion. Since 1979, resources within those figures available to the hospital and community health service in Scotland have increased from £801 million to £3,146 million. Between 1979 and 1994, overall staffing in the NHS increased by 4.5 per cent. However, in that period, the nursing work force increased by more than 20 per cent., and the qualified nursing work force by 34 per cent.

Mrs. Ewing: I want the Minister to pin carefully the argument that Ministers propound so often--that somehow or other the Scottish national health service is subsidised and given additional funding. Does he agree that, in the five years since 1986, in England and Wales additional funding has been 18.2 per cent., whereas in Scotland it has been only 14.6 per cent.?

Lord James Douglas-Hamilton: The settlement in England this year, of 1 per cent., is greater than that in Scotland, which is 0.35 per cent. Scotland has had a

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substantial increase and, as I have mentioned, health expenditure per head is 23 per cent. higher than in England. The hon. Lady would not wish us to be put on the same basis as England, because health expenditure in Scotland would be cut to an extent that she would hardly have dreamed possible.

Before making its current recommendations, the nurses' review body considered evidence from both staff organisations and management. We have implemented in full all the recommendations of the nurses' review body

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since its inception. This has contributed to an increase in nurses' salaries of 53 per cent. in real terms since 1979. Resources are available to meet the increases recommended by the review body. Taken together, those points surely demonstrate our continuing commitment to the provision of very high-quality NHS health care in Scotland, and they recognise the contribution made to this by the broad group of nursing staff.

Question put and agreed to.

Adjourned accordingly at twenty-eight minutes to Nine o'clock.

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