House of Commons - Health

Select Committee on Health Fourth Report

2 Workforce developments since 1999

9. Since the Committee's most recent workforce report was published in 1999, there have been significant changes to the health service workforce and to the workforce planning system. Some of the main developments are shown below:

Key workforce developments since 1999
March 1999 - Committee report Future NHS Staffing Requirements published
April 2000 - Publication of DH paper A Health Service of all the talents
July 2000 - Publication of NHS Plan; start of Improving Working Lives scheme
April 2001 - Creation of Workforce Development Confederations (WDCs); creation of
NHS Modernisation Agency (MA) and National Practitioner Programme
October 2002 - Creation of Strategic Health Authorities (SHAs)
April 2003 - New consultant contract begins
April 2004 - New GP contract begins; WDCs merged with SHAs
November 2004 - Creation of NHS Employers
August 2004 - European Working Time Directive extended to trainee doctors
December 2004 - Agenda for Change agreement finalised
April 2005 - New pharmacy services contract begins; net NHS deficit of £251 million
July 2005 - MA replaced by NHS Institute for Innovation and Improvement
August 2005 - Start of introduction of Modernising Medical Careers
November 2005 - Secretary of State commits to achieving net NHS financial balance by
end of 2006-7
March 2006 - Permit-free training for overseas doctors ended
April 2006 - New dentistry contract begins; net NHS deficits reach £547 million
July 2006 - Number of SHAs reduced from 28 to 10

10. In this chapter, we examine some of the key changes to the health service workforce and the reasons they have taken place. We consider the following areas:

The main reasons for workforce changes including policy changes and significant funding growth;

Changes in staffing numbers, including overall workforce size, domestic training capacity and the level of international recruitment;

Adjustments to staff pay and contracts including the new consultant contract, GP contract and Agenda for Change; and

The introduction of new ways of working including skill mix changes and other attempts to improve the efficiency of the workforce.

Reasons for workforce changes

11. In this section we look at some of the main policies and other developments which have influenced changes to the workforce. These included:

The impact of the previous Health Select Committee report, particularly through the A Health Service of all the talents review (2000);

The impact of the NHS Plan (2000) and the unprecedented growth in health service funding from 2000 onwards;

The Shifting the Balance of Power in the NHS reforms (introduced in 2001) which included the creation of SHAs and Primary Care Trusts (PCTs);[2] SHAs have subsequently taken over a number of key workforce planning responsibilities from WDCs;
The rise in equal pay claims, based on precedents such as the 1992 Enderby v Frenchay Health Authority ruling, which was an important cause of pay reforms, particularly the Agenda for Change agreement;
Technological changes, for example the introduction of vascular stenting and the increasing use of automation and robotics, which have radically altered demand for particular staff groups, especially within medicine;[3]
The effects of the extension of European Working Time Directive legislation to doctors in training (August 2004);
The impact of increasing NHS deficits from 2005 onwards; and
The Our Health, Our Care, Our Say white paper (published in January 2006) which set out plans to shift 5% of hospital activity into primary care.

We look at some of the most important reasons for change in more detail below.

A HEALTH SERVICE OF ALL THE TALENTS

12. The Health Committee's previous workforce report, Future NHS Staffing Requirements, was published in February 1999. The report concluded that the NHS was "in the midst of a staffing crisis" and made a number of recommendations for changes to the workforce and the workforce planning system.[4] Recommendations included the development of a more integrated planning system, increasing medical student numbers by 1,000 per year and the introduction of a single pay system for all NHS staff. Perhaps the most significant proposal was for "a major review of current planning procedures",[5] a recommendation which the Government accepted.[6]

13. The subsequent review of workforce requirements and workforce planning procedures led to the publication of the A Health Service of all the talents consultation in April 2000. The proposals set out in the report included,

The development of a more streamlined and integrated workforce planning system with better integration between workforce and financial planning and between medical and non-medical planning and funding;
The creation of a National Workforce Development Board to oversee workforce planning and regional Workforce Development Confederations to co-ordinate workforce planning and commission education and training;
Efforts to increase the flexibility of the workforce including flexible career opportunities and co-ordinated attempts to change skill mix and develop new and extended clinical roles; and
An increase in staff numbers, particularly of medical staff (although the report noted that increases in numbers "will need to be accompanied by changes in the way in which they work".)[7]

14. A Health Service of all the talents set out a clear mandate for change to the health service workforce through reform of the workforce, particularly through increasing flexibility, and workforce growth. The proposals also set out significant changes to the workforce planning system, most notably through 'care group' workforce planning to link plans to service need;[8] and through the creation of Workforce Development Confederations (WDCs). WDCs, 24 of which were established in 2001, were regional organisations dedicated specifically to workforce issues and increased the number of staff involved with workforce planning and development. WDCs were overseen by the eight NHS Regional Offices until they were replaced by SHAs in 2002.

THE NHS PLAN

15. Just three months after the publication of A Health Service of all the talents, the Government launched the 10-year NHS Plan (July 2000). The NHS Plan set out an ambitious programme for the reform of the health service designed to expand capacity, improve access and increase the responsiveness of services. Specific service targets included reducing maximum waiting times in Accident and Emergency departments to 4 hours by 2004, and reducing waits for inpatient treatment to less than 6 months by 2005.[9] Achieving these goals required a significant and rapid increase in staff numbers. Targets for workforce expansion were set out in the NHS Plan and in Delivering the NHS Plan 2 years later.

16. Crucially, the NHS Plan was accompanied by unprecedented increases in the level of health spending, designed to bring UK spending levels in line with the rest of the EU. High levels of funding growth were subsequently secured until 2008 and underpinned workforce expansion targets. Funding increases also supported the NHS Plan's stated ambition of increasing pay levels for all NHS staff. Health service funding levels before and after the start of the NHS Plan are shown in the table below.

Financial Year Status of figures NHS expenditure (£ billion) Real terms increase (%) NHS spending as % of GDP

1997-98 Outturn 34.664 2.1 5.4%

1998-99 Outturn 36.608 3.0 5.4%

1999-2000 Outturn 39.881 6.8 5.4%

2000-01 Outturn 43.932 7.8 5.6%

2001-02 Outturn 49.021 9.0 6.0%

2002-03 Outturn 54.042 6.9 6.3%

2003-04 Outturn 64.181 11.9 6.7%

2004-05 Outturn 69.306 5.1 7.0%

2005-06 Estimated 77.847 10.0 7.3%

2006-07 Plan 84.387 5.8 7.4%

2007-08 Plan 92.173 6.4 7.8%

Table 1: NHS expenditure, 1997-2008

Source: Department of Health

17. The NHS Plan set out clear requirement for NHS organisations to increase the size of their workforce in order to meet exacting new service goals, particularly reductions in waiting times. At the same time, major budget increases provided extra resources to recruit additional staff and to increase pay. These two developments have been the main reasons for the rapid expansion in workforce capacity (see paragraphs 23-33).

THE EUROPEAN WORKING TIME DIRECTIVE

18. The European Working Time Directive 93/104/EC, which restricts employees to 48 working hours per week, came into effect in the UK in October 1998. In August 2004, the directive was extended to cover doctors in training, who were limited to working no more than 58 hours per week. This will be further extended in 2009 to reduce doctors in training to working a maximum of 48 hours per week. These changes are having a significant effect on workforce capacity, as junior doctors have traditionally worked considerably more than 58 hours per week.[10]

19. Equally significantly, the 2004 changes stipulated that on-call time should be counted as part of doctors' working hours, a provision which is still subject to legal challenges.[11] As a result, the resident on-call system (whereby junior doctors stay overnight in hospital but are available for work) has been replaced by more rigid shift working. Such changes have in turn affected non-medical staff; nursing staff, for example, have often been required to take on additional responsibilities in response to reductions in junior doctor capacity.[12] Thus the European Working Time Directive regulations have been an important reason for the introduction of new ways of working, and particularly the redesign of clinical roles.

NHS DEFICITS

20. In spite of the record funding increases which accompanied the NHS Plan, the health service has experienced increasing deficits in recent years. Total net NHS deficits in 2004-05 totalled £221 million, and this went up to £547 million in 2005-06. 6-month figures for 2006-07 show that 178 NHS organisations are currently in overall deficit (70 NHS trusts and 108 PCTs).[13] The gradual increase in the depth and breadth of deficits is shown in the table below:

Financial Year Surplus/(deficit) reported in audited accounts (£m) % of NHS organisations with an overall deficit

2001/02 71 8

2002/03 96 12

2003/04 73 18

2004/05 (251) 28

2005/06 (547) 31

Table 2: NHS deficits, 2001-2006

Source: Department of Health/NAO

21. The emergence of deficits has placed significant pressure on NHS organisations to reduce workforce costs. As the Committee's recent report on the subject described, cost saving measures have included job reductions, education and training cuts, and some compulsory redundancies.[14] The need for savings of this type has been increased by the Secretary of State's pledge that the NHS will achieve financial balance by the end of the 2006-07 financial year.[15] Thus deficits are an increasingly important reason for workforce change.

Staff numbers

22. The main effect of these changes was a major expansion in workforce numbers up to around 2005, followed by the emergence of deficits in 2004-05 with consequences including cuts in domestic training capacity and graduate unemployment. We discuss these developments below.

WORKFORCE EXPANSION (2000-2005)

23. By 2000, the need to increase the size of the NHS workforce had been clearly established: the Committee's 1999 report described the "crisis" in staffing numbers. The NHS Plan set clear targets for expanding the workforce and subsequent funding increases ensured that money was available to increase recruitment.

Overall staff numbers

24. Between 1999 and 2005, the NHS workforce increased by 260,000, an increase in workforce size of more than 24%. Expansion was at its quickest in the period immediately after the publication of the NHS Plan (2000), as shown below.

Year 1999 2000 2001 2002 2003 2004 2005

Total NHS workforce (headcount, 000s) 1,098 1,118 1,166 1,224 1,283 1,331 1,365

% increase 2.5 1.8 4.4 4.9 4.8 3.7 2.6

Table 3: NHS workforce growth, 1999-2005

Source: Department of Health

25. Growth during this period was not evenly distributed across different staff groups in the health service. Growth was fastest amongst management staff (62%) and 'central functions' staff, which includes finance, Human Resources and IT (43%). Growth was considerably slower amongst nursing staff (23%), although an additional 75,000 nurses were employed during this period. The number of hospital consultants grew more than twice as quickly as the number of General Practitioners. Increases in numbers across a range of staff groups are shown below:

Staff Group Total (1999) Total (2005) % Increase (1999-2005)

All 1,098,348 1,366,030 24.4%

Doctors (all) 94,953 122,987 29.5%

Consultants 23,321 31,993 37.2%

GPs 29,987 35,302 17.7%

Nurses 329,637 404,161 22.6%

Allied health professionals 47,920 61,082 27.5%

Scientific and technical 54,471 73,452 34.8%

Clinical support staff 296,619 376,219 26.8%

Central functions 73,996 105,565 42.7%

Senior management 24,287 39,391 62.2%

Table 4: NHS workforce growth by staff group, 1999 -2005 (headcount)

Source: Department of Health

26. While the NHS Plan was a major reason for increases in staffing numbers, the actual rate of growth significantly exceeded targets and projections for most staff groups. For example the NHS Plan set a target for increasing nursing numbers by 20,000 between 1999 and 2004. In fact, nursing numbers increased by more than 67,000 during this period, some 340% in excess of the original target. Delivering the NHS Plan (2002) set a revised target of 35,000 additional nurses between 2001 and 2008. This target was achieved within 2 years, rather than the allotted 7, and by 2005 nursing numbers had increased by more than 53,000 relative to 2001 levels. Given the increase in funding, it was inevitable that the growth in staff numbers would exceed NHS Plan projections.[16] The table below provides a fuller comparison of actual staff growth relative to NHS Plan targets.

Staff Group Projected new staff: 1999-2004 Actual new staff: 1999-2004 Variance

Consultants 7,500 7,329 3% under target

GPs 2,000 4,098 105% over target

Nurses 20,000 67,878 340% over target

Allied health professionals 6,500 11,039 69% over target

Table 5: Comparison of 2000 NHS Plan growth targets with actual workforce growth (1999-2004, headcount)

Source: Department of Health

International recruitment

27. Increases in staff numbers were achieved through a number of different approaches including increased domestic training capacity, efforts to encourage UK staff to return to work, and an expansion in international recruitment. International recruitment was one of the main means of increasing staff numbers, particularly between 2000 and 2003. As Andrew Foster, then Director of Workforce at the Department of Health, explained to the Committee,

…if I go back to 2001-2002 when we were tasked with these massive increases in the NHS workforce… we knew that we did not have enough input of nurses and doctors [from domestic sources] to deliver the capacity that was required to achieve the main objectives of improving access. Thus we set up the international recruitment programme…[17]

28. The growth in international recruitment between 1999 and 2005 was considerable. In medicine, for example, around 60,000 doctors registered with the General Medical Council between 2002 and 2005. Of these, 31% had qualified in the UK, 16% qualified in the rest of the European Economic Area (EEA), and the remaining 53% outside the EEA.[18] The growth in the number of doctors who qualified outside the UK as a proportion of the total medical workforce is shown in the table below.

Year 1999 2000 2001 2002 2003 2004 2005

UK doctors qualified within United Kingdom 72.4% 72.2% 71.9% 70.5% 69.5% 67.8% 66.4%

UK doctors qualified in remainder of the EEA 5.6% 5.4% 5.4% 5.5% 5.5% 5.6% 5.7%

UK doctors qualified elsewhere in the world 22.0% 22.4% 22.7% 24.0% 25.0% 26.7% 27.8%

Table 6: The UK medical workforce by area of qualification, 1999-2005

Source: Department of Health

29. Similar trends are apparent elsewhere in the workforce. The number of overseas nurses registering with the Nursing and Midwifery Council grew from around 5,000 in 2000 to more than 15,000 in 2002,[19] and remained above 12,000 per year between 2003 and 2005.[20] Similarly, the number of overseas physiotherapists registering in the UK rose from 500 in 2000 to 1,300 in 2005.[21] Much of the recruitment of overseas staff during this period was overseen and co-ordinated by the Department of Health.[22] In 2001, the Department introduced a Code of Practice which prohibited NHS organisations from actively recruiting in developing countries unless prior agreement has been reached at a governmental level.[23]

Retention and return-to-work schemes

30. In its evidence, the Department of Health asserted that the growth in staff numbers resulted in part from improved staff retention and the use of return-to-work schemes to bring retired or unemployed healthcare staff back to the NHS.[24] However, it provided little evidence of the impact of these trends. On retention rates, witnesses presented a different view, arguing that rates have not improved substantially. One witness even commented that "There is little evidence that retention can be improved to a significant degree".[25] A recent survey of the nursing workforce presented a similar view, commenting that there has been "little change in [nursing] wastage rates over the last few years".[26]

31. Return-to-work schemes do seem to have played a significant role in the increase in staff numbers, however. In nursing, for example, large numbers of staff enrolled on such schemes after 1999, as shown below.

Year Nurses enrolling on return to work schemes

1999-2000 3,287

2000-2001 4,478

2001-2002 3,762

2002-2003 3,795

2003-2004 3,463

Table 7: Nursing enrolling on return to work schemes: 1999-2004 (data not collected centrally after 2004)

Source: Department of Health

Not all of these staff will have contributed to the growth in NHS nursing numbers, as these figures include staff returning to non-NHS organisations. In spite of this, return-to-work schemes clearly played a substantial part in the expansion of the NHS workforce after 1999.

Domestic training places

32. Alongside the increase in overall staff numbers, the NHS Plan set targets for expanding domestic training capacity.[27] The number of people beginning training within key clinical professions increased very rapidly between 1999 and 2005, as shown in the table below:

Year 1999 2000 2001 2002 2003 2004 2005 % Increase: 1999-2005

Medicine 3,972 4,300 4,713 5,277 6,082 6,294 6,298 58.6%

Dentistry 647 672 672 711 726 722 919 42.0%

Nursing 17,692 18,923 20,610 21,736 22,815 24,069 23,651 33.7%

Physiotherapy 1,473 1,780 2,157 2,345 2,418 2,360 2,360 60.2%

Occupational Therapy 1,173 1,385 1,563 1,692 1,822 1,981 2,008 71.2%

Radiography 581 578 690 818 833 860 864 48.7%

Table 8: UK healthcare training places, 1999-2005

Source: Department of Health

33. Like the overall growth in staffing numbers, the increase in domestic training output was driven in part by NHS Plan targets.[28] Unlike overall staffing numbers, the increase in training capacity remained broadly in line with central targets. It is important to note, however, that increases in the number of students entering training from 2000 onwards did not result in increases in output until considerably later, because of the time taken to train healthcare staff. Therefore increases in training capacity could not be translated into increases in workforce numbers until around 2006 at the earliest in the case of medicine, and until around 2003 in the case of most other health professions. Thus the most concentrated period of growth in staff numbers, between 2000 and 2003, cannot be accounted for by the growth in UK training numbers; rather it resulted from international recruitment and other developments.

WORKFORCE CONTRACTION (2005 ONWARDS)

34. From around 2005, there is evidence of a sudden and distinct change in health service workforce trends. The growth in staff numbers came rapidly to an end and in some areas the workforce may be beginning to contract. The overshooting of workforce growth targets between 1999 and 2005 was a major cause of this problem. Workforce expansion was a major cause of the deficits that emerged in the NHS from 2004-05 onwards, which have in turn driven the sudden downturn in workforce size.[29] The direct links between unexpectedly rapid workforce expansion, the emergence of deficits, and subsequent staff redundancies, were acknowledged by the Secretary of State during the Committee's NHS Deficits inquiry:

The reality is that the NHS has spent more of the growth money on additional staffing than was planned and has taken on significantly more hospital doctors and significantly more nurses…than the NHS Plan intended. That is why some individual organisations around the country are now having to make some very difficult decisions on their staff, including in some cases redundancy…[30]

35. In this section we describe the impacts of deficits on staff numbers, training capacity and international recruitment. The drive to restore financial balance has put pressure on all NHS organisations, whether in deficit or not, to make savings on workforce costs. Savings have been made in two main areas:

Many provider organisations, who employ the great majority of NHS staff, have made direct savings by freezing or removing vacant posts, by not replacing retiring staff or, in a small number of cases, through compulsory staff redundancies; and
Many Strategic Health Authorities have returned large surpluses in order to compensate for deficits elsewhere in the system (SHAs returned surpluses totalling £524 million in 2005-06); the savings required to achieve such surpluses have come mainly through cuts in education and training provision.[31]

Redundancies and job reductions

36. Estimates of the scale of current redundancies and job reductions (the removal of vacant posts from staffing establishments) have varied. A recent Office for National Statistics report estimates that the total number of NHS staff fell by 11,000 in the final quarter of 2006.[32] Job reductions have been announced by a large number of NHS bodies, including organisations that had recently recruited large numbers of staff.[33] A Royal College of Nursing (RCN) survey in August 2006 estimated the total number of job reductions at 18,000.[34] The RCN subsequently told the Committee during its inquiry into NHS Deficits, that up to 19,000 posts alone were "at risk".[35]

37. The number of compulsory redundancies is significant but considerably lower than the number of job reductions. Department of Health officials described media reports of widespread redundancies (as opposed to job reductions) as a "gross misrepresentation" of the real picture.[36] The Department of Health announced in February 2007 that 1,446 compulsory redundancies were made in the NHS in the first three-quarters of the 2006-07 financial year.[37] 79% of redundancies were among non-clinical staff, many of which resulted from the reduction in PCT and SHA numbers required by the Commissioning a patient-led NHS reforms.[38] The precise impact of these changes on total NHS staffing numbers is difficult to assess, particularly as 2006 workforce figures are not yet available. However, it is clear that workforce growth is slowing down dramatically.

38. Worryingly, the Committee heard evidence that in many cases job reductions have ignored future service and workforce requirements. For example, we were told that a number of specialist breast cancer nursing posts had been frozen, in spite of the increasing demand for breast cancer services.[39] The RCN stated that,

…the reductions in posts that we are seeing right now are not as a consequence of thought-out service change, service improvement, but rather they are a knee-jerk reaction.[40]

International recruitment restrictions

39. The downturn in workforce expansion has created pressure to protect job opportunities for UK-trained staff. This has resulted in recent attempts to constrain the level of international recruitment. In March 2006, the Department of Health and the Home Office announced an end to permit-free training for overseas medical staff.[41] Postgraduate medicine will no longer be classed as a 'shortage' profession, and so doctors from outside the EEA will only be permitted to apply for UK training posts if there is a shortage of applicants from within the UK or EEA.[42] Similar changes were announced for junior physiotherapy posts in July 2005,[43] and for general nursing posts in July 2006.[44] Although the precise effects of these recent changes are not yet evident, they will inevitably lead to a rapid and significant reduction in the inflow of overseas clinicians to the NHS.

40. Department of Health officials defended the new regulations, arguing in the case of medical staff that it was necessary to restrict international applications in order to protect opportunities for UK graduates.[45] The British Association of Physicians of Indian Origin (BAPIO) was strongly critical, however, pointing out that the new regulations will have "devastating consequences" for non-EEA doctors already in training within the UK.[46] BAPIO was also critical of the "abrupt fashion" in which the changes were made, and the perceived lack of consultation over the new regulations.[47]

Domestic training reductions

41. Unlike the expansion in overall staff numbers, the growth in domestic training capacity up to 2005 remained roughly in line with NHS Plan targets. In parallel with staff numbers, however, there is evidence of a more recent downturn in training numbers. The Council of Deans and Heads of UK University Faculties for Nursing and Health Professions highlighted significant reductions in the number of non-medical training places commissioned by SHAs for the 2006-07 academic year. The Council stated that 10-15% cuts had been requested by 'nearly all' SHAs and that cuts were as high as 30% in some areas.[48] Detailed evidence from the University of the West of England showed cuts of more than 30% to physiotherapy and occupational therapy courses in this area.[49]

42. Widespread cuts in training commissions were acknowledged by witnesses from SHAs,[50] and by the Minister of State for Quality, Lord Hunt, who commented that,

…we gave SHAs more discretion in the use of their budget this year…some of them have used that discretion to reduce some of the training that they finance, and that is a product of the deficit position in the Health Service. Now, my concern is to make sure that this is very much a one-off and that going into the next financial year SHAs will ensure the continuation and investment in long-term training programmes.[51]

43. However, other witnesses were much less confident that cuts in education and training intake would not be repeated in future. The Council of Nursing Deans stated that,

My nightmare prediction is that there will be a continual raiding of the [education and training] budget unless it is ring-fenced, unless it is protected, and I think the implications of that for even the short-term workforce requirements could be devastating.[52]

As in the case of job reductions, witnesses stressed that cuts in education and training places had often taken place in order to maximise financial savings rather than because of a reduction in demand for clinical staff.[53]

Graduate unemployment

44. Another serious consequence of increasing deficits has been the increasing difficulty experienced by healthcare graduates in finding employment within the NHS. The Chartered Society of Physiotherapy (CSP) told that Committee that 68% of 2006 physiotherapy graduates have been unable to find NHS physiotherapy work.[54] The CSP estimated that in a normal year, only 5% of graduates would typically be unemployed.[55] A similar, though less acute, problem exists for 2006 nursing graduates, of whom 60% have found NHS work within 6 months of graduation compared with the usual figure of 85%.[56] Witnesses highlighted similar problems affecting midwifery, speech therapy, occupational therapy and dietetics graduates.[57] The Committee also heard fears about possible future unemployment amongst UK medical graduates and junior doctors, particularly as a result of the shortage of training capacity within the new Modernising Medical Careers system.[58]

45. Once again, the Committee heard that graduate unemployment had not occurred because staff were not needed, but rather because of the pressure to make financial savings and the failure to plan for the output of increases in domestic training capacity. For example, the CSP stated that,

The short term impact of NHS financial deficits should not be under-estimated in considering the problems for graduates. Financial freezes have led to vacancy freezes in 2004, 2005 and 2006. Junior posts are more vulnerable to being frozen than senior posts…Unemployed physiotherapy graduates are not a symptom of over supply but of a failure in NHS workforce planning which has been unable to ensure sufficient posts for newly qualified staff, particularly in primary care.[59]

Pay and contracts

46. As well as substantially increasing workforce numbers, the health service has made changes to employment conditions for the majority of its staff in recent years. Most significantly, and in keeping with the recommendation of the Committee's 1999 report, a single pay spine has been introduced for all NHS staff, excluding doctors. Most health service staff have received substantial pay increases during this period and the growth in pay costs has exceeded Department of Health expectations. In this section, we examine the effects of the new contracts and the expansion in health service pay costs. In Chapters 3 and 4, we examine attempts to increase workforce productivity through the changes in working practices which accompanied the new contracts.

THE NEW DEALS

47. The new contracts and pay systems introduced in recent years cover the vast majority of NHS staff as well as remuneration for services provided by independent contractors such as GPs and pharmacists. New contracts have been structured in a variety of different ways, with a range of different appraisal and incentive systems. We examine the effects of each of the new contracts below, focussing particularly on Agenda for Change, the new consultant contract and the new GP contract.

Agenda for Change

48. The Agenda for Change agreement was driven by the need for increased workforce flexibility, one of the main priorities of A Health Service of all the talents.[60] The switch to a single pay system also aimed to reduce the growing number of equal pay claims. The agreement was finalised in December 2004 following 5 years of negotiations between the four UK health departments, the NHS Confederation and 20 trades unions and other membership organisations. Agenda for Change established a single pay system to cover all NHS staff, excluding doctors, and to replace the Whitley pay scales which had been used since the establishment of the NHS in 1948. The new system is made of nine separate pay bands with a number of different pay points within each band. Staff have been moved from previous Whitley pay scales to the new Agenda for Change system following the mammoth 'job matching' process, which required each job role in each NHS organisation to be separately assessed and translated to the new system.[61] UNISON told the Committee that 97% of staff have now been transferred to the Agenda for Change pay system.[62]

49. Due to the scale and complexity of the job evaluation process, it is difficult to assess the exact effect of Agenda for Change on staff pay rates. However, it is clear that the majority of staff have received substantial pay increases. The RCN estimated that the new agreement would lead to average pay increases of 15.8% over 3 years for nursing staff, the largest occupational group affected by Agenda for Change.[63] This estimate is supported by a comparison of average pay rates for newly qualified nurses before and after the agreement, which shows that pay rates rose by around 10% in the first year of the new deal.

Year and pay scheme 2001: Whitley 2002: Whitley 2003: Whitley 2004: Whitley 2005: Agenda for change 2006: Agenda for change

Min. salary £15,445 £16,005 £16,525 £17,060 £18,698 £19,166

% increase 3.73% 3.63% 3.25% 3.24% 9.60% 2.50%

Table 9: Comparison of newly qualified nursing salaries, 2001-2006 - D grade Whitley minimum salary and Band 5 Agenda for Change minimum salary

Source: Department of Health

50. Another indication of the impact of Agenda for Change on pay rates can be seen in the increase in the minimum wage paid to NHS staff. The hourly rate for the lowest paid NHS staff rose from £4.85 in April 2004 to £5.89 in April 2005, an increase of more than 21% in one year.[64] The proportion of staff experiencing 'protected pay' (meaning that they have been assimilated onto the new system at a lower pay rate than previously) has been extremely low. Department of Health officials estimated that 4.5% of the 900,000 staff that have moved to Agenda for Change are on protected pay, an estimate confirmed by staff representatives.[65] The remaining 95% of staff have seen their pay rates maintained or, more commonly, increased.

51. The Agenda for Change agreement has not only brought increases in pay, but also contains significant measures to support workforce reform. Reforms include the requirement for an annual appraisal and the production of a personal development plan for each staff member, a process supported by the new Knowledge and Skills Framework (KSF) which accompanied the Agenda for Change agreement. We look in more detail at the KSF in Chapter 4.

Primary care contracts

52. There have been a range of new contracts for primary care services in recent years which have affected staff incomes and pay rates. The most significant was the General Medical Services (GMS) contract under which GP practices have operated since April 2004. New contracts have subsequently been introduced for pharmacy and dental services. The new GMS contract has brought fundamental changes to the way in which the income of GP practices is determined. Practice income is now calculated according to three main criteria: the number of patients on a practice list; the range of clinical services offered by the practice; and the practice's performance as assessed against the new Quality and Outcomes Framework (QOF). We consider the impact of the QOF in more detail in Chapters 3 and 4.

53. The new contract has significantly increased GP practice income. According to some reports, individual GPs can earn up to £250,000 per year under the new deal.[66] Department of Health figures show that average GP incomes have risen substantially in recent years, increasing by almost 70% between 2001-02 and 2005-06. The most substantial increase, of almost 20% in a single year, occurred when the new contract was introduced in 2004-05:

Year 2001-02 2002-03 2003-04 2004-05 2005-06

Average GP earnings 56,510 64,443 72,752 87,076 95,350

% increase on previous year 4.22% 14.04% 12.89% 19.69% 9.50%

Table 10: Average GP income, 2001-2006

Source: Memoranda from the Department of Health, Public Expenditure on Health and Personal Social Services 2006, HC 1692-i, Ev 89

54. The new pharmacy services contract was introduced in April 2005 and the new dentistry contract a year later. The pharmacy contract ensures that all community providers offer a range of 'essential' services and also allows PCTs to commission 'enhanced' services from particular providers. The dental contract replaces payment per item of service with a broader payment system based on the number of courses of treatment completed. Because of the very recent implementation of the two deals, there is little evidence to date of their impact on costs and incomes. However, the Department of Health has stated that the new dental contract will not lead to an overall increase in costs.[67]

The consultant contract

55. Hospital doctors are the only NHS-employed occupational group not covered by the Agenda for Change agreement.[68] Instead, a separate contract for hospital consultants was introduced, beginning in April 2003. By May 2005, 90% of consultants had voluntarily moved to the new contract, although implementation has taken longer than was originally expected.[69] The new contract aimed to link consultant pay rates more closely to the number of hours worked and to give NHS organisations more say in consultants' clinical activities through an annual 'job planning' process. We look in more detail at job planning in Chapters 3 and 4.

56. The new contract has led to a significant increase in average consultant pay. A Kings Fund study showed that consultant basic salaries rose by 17% between 2002 and 2003, when the new deal was introduced. By 2005, basic salaries had risen by more than 34% relative to 2002 levels.[70] The British Medical Association (BMA) told the Committee that average pay rises over this period had been considerably lower.[71] However, Department of Health figures for average consultant earnings show increases similar to the Kings Fund estimates, with earnings rising by more than 14% in 2003-04 and by almost 27% by 2005-06, relative to pre-contract levels.

Year 2002-03 2003-04 2004-05 2005-06

Average consultant earnings 86,746 99,168 103,648 109,974

% increase relative to 2002/3 n/a 14.32% 19.48% 26.78%

Table 11: Average consultant earnings, 2002-2006

Source: Memoranda from the Department of Health, Public Expenditure on Health and Personal Social Services 2006, HC 1692-i, Ev 90

THE COST OF PAY REFORM

Overall costs

57. It is evident that pay rates have increased substantially for a wide range of staff groups as a result of the new contracts and pay systems introduced since 1999. Rising pay costs have absorbed a significant proportion of the extra money available to the NHS: in 2005-06, 47% of extra funding was spent on increases in pay.[72] The most recent estimates from the Department of Health project that £2.2 billion will be spent on implementing Agenda for Change by 2008-09,[73] and £444 million on the new consultant contract by 2007-08.[74] Overall spending on GP services is expected to rise by a third between 2003-04 and 2006-07, and on pharmacy services by 8% between 2005-06 and 2006-07.[75]

58. In spite of these projections of significantly increased expenditure, the cost of pay reform has consistently exceeded Department of Health expectations. Officials told the Committee that spending on Agenda for Change had exceeded projections by £100 million in 2004-05,[76] although subsequent information implied an overspend of £220 million.[77] Officials also acknowledged an overspend of £90 million on the new consultant contract and £250 million on the new GP contracts in 2004-05.[78] Subsequent information showed that the overspend on the GP contract was expected to remain at £250 million in 2005-06.[79] Total overspends for 2004-05 are shown below.

Contract GP contract Agenda for Change Consultant contract Total overspend

Overspend: 2004-5 £250 million £220 million £90 million £540 million

Table 12: Overspending on pay reform relative to projected spending, 2004-05

Source: Department of Health

Deficits and pay reform

59. During the Committee's deficits inquiry, the Secretary of State acknowledged the need to improve the accuracy of pay cost projections, although she denied that overspending on the new contracts was a major cause of deficits.[80] Other witnesses disagreed, arguing that excess costs associated with the new contracts had significantly exacerbated deficits in particular organisations.[81] One witness estimated that the consultant contract alone had cost £3 million more than expected to implement within a single hospital trust in one year;[82] another commented that the combined overspend on the consultant contract and Agenda for Change implementation had totalled £4.5 million in one trust.[83]

60. More recently, there is evidence of attempts to control pay inflation, particularly for directly employed staff. In March 2006, the Department of Health announced that the annual uplift on Agenda for Change pay rates would be 2.5%, less than the 3.225% awarded in previous years.[84] More significantly, consultant pay was increased by only 1% for the first 6 months of the 2006-07 financial year, a move described as a "slap in the face" and a "betrayal of senior hospital doctors" by the BMA.[85] On 1 March 2007, the Secretary of State announced that Agenda for Change rates would be increased by 1.9% over 2007-8 and consultant pay increased by around 1%. There was no increase to GPs reimbursement rates for 2007-08.[86] The decision was described as "a real disappointment" by UNISON; [87] and as "a grievous insult to GPs" by the BMA.[88]

New ways of working

61. Major changes to the number of staff and to contracts and pay levels have been the dominant themes of workforce developments since 1999. In addition, there have been a number of attempts to change and improve the effectiveness of health service staff by introducing new ways of working. The Department of Health acknowledged that workforce reform has played a minor but significant role in recent years:

…the last five years has been 80% about growth and 20% about transformation and new ways of working.[89]

CHANGES TO WORKING PRACTICES

62. Much of the impetus for introducing new ways of working was provided by A Health Service of all the talents, which concluded that '…the NHS workforce, whose commitment no-one can doubt, needs to be transformed in order to provide the sort of care which will be needed in the future.' The paper's recommendations included the need for improved team-working, a more flexible workforce, and greater variation in the mix of different staff groups (skill mix).[90] Further pressure for changes to traditional working practices came with the 2004 European Working Time Directive regulations which vastly reduced junior doctors' working hours and forced hospitals to consider alternative ways of providing basic clinical care.[91] Some workforce reforms were also introduced directly by the NHS Plan, notably the Improving Working Lives initiative.[92]

63. There have been a range of attempts to change working practices at national and local level, some of which we describe below and some of which we consider in more detail in Chapters 3 and 4. Developments have included:

The Changing Workforce Programme, run by the NHS Modernisation Agency (see below);
The Improving Working Lives initiative (see below);
The reorganisation of postgraduate medical training through the Modernising Medical Careers initiative (see below);
The recent, national Productive Time initiative which aims to increase the efficiency of the workforce, for example by reducing turnover, absenteeism and the use of agency staff;[93]
The Modernising Nursing Careers scheme, launched in 2006, which aims to provide a clearer and more flexible career structure for nursing staff;[94]
The Knowledge and Skills Framework which accompanied the Agenda for Change agreement and which aims to increase workforce flexibility and improve access to education and training;[95] and
The new Quality and Outcomes Framework which creates incentives for GPs to provide particular clinical services and focuses on improving patient outcomes.[96]

The Changing Workforce Programme

64. The Changing Workforce Programme (CWP) was launched in 2001 with the aim of co-ordinating and overseeing the introduction of a number of new and amended clinical roles within the NHS. The CWP was hosted by the MA and managed a range of projects aiming to increase the flexibility of the health service workforce by training staff to take on additional responsibilities on top of, or in place of, their traditional work. In particular, the CWP aimed to introduce Assistant Practitioner roles (immediately below professional level) and Advanced Practitioner roles (allowing existing professionals to take on a range of additional responsibilities).

65. Following the closure of the MA in 2005, a small part of the work of the CWP has been continued by the National Practitioner Programme (NPP). Since 2001, the CWP and NPP have overseen the introduction of new roles across a range of service areas including emergency care, critical care and in operating theatres.[97] Examples of new roles include Surgical Care Practitioners, Endoscopy Technicians and community Emergency Care Practitioners, of which more than 700 are now working in the NHS.[98]

66. Alongside this work, there have been a range of other efforts to introduce new and amended roles.[99] Nurses in particular have taken on a range of advanced roles, for example in epilepsy, diabetes and emergency care. Research by the Royal College of Nursing shows that the number of nurses in advanced roles increased significantly from 2001 onwards.[100] Nurses in advanced roles have been widely used in response to the challenges presented by the 2004 European Working Time Directive regulations.[101] Extended roles have also been introduced within a number of other health professions, notably for physiotherapists in Accident and Emergency departments,[102] and for radiographers in image reporting.[103] Department of Health officials told the Committee that, in total, more than 100 new and extended clinical roles have been introduced in recent years.[104]

Improving Working Lives

67. Workforce reforms have also focussed on improving the quality and flexibility of working conditions for NHS staff, principally through the Improving Working Lives (IWL) initiative. IWL assesses the performance of all NHS organisations at providing better working conditions, for example by increasing access to flexible working arrangements and to childcare facilities, and by improving the quality of communication with staff. Since the start of IWL in 2000, all NHS trusts have achieved Practice status (showing a basic level of compliance) and more than 300 trusts have achieved the more advanced Practice Plus status.[105] Submissions from key organisations such as UNISON and NHS Employers stressed the importance of IWL initiatives in achieving recent improvements in staff retention rates.[106]

Modernising Medical Careers

68. Another significant reform has been the ongoing introduction of the Modernising Medical Careers (MMC) programme, which brings significant changes to postgraduate medical training. MMC, which is undergoing phased implementation between 2005 and 2010, replaces the traditional House Officer and Registrar training grades with a redesigned run-through training programme involving two years of Foundation training followed by 3-7 years of Specialty or GP training.[107] The MMC reforms particularly aim to increase the flexibility of the medical workforce and to make the medical education and training system more responsive to future service requirements. However, serious concerns have been raised about the Medical Training Applications Service (MTAS) which is being used to implement the MMC reforms, and the Department of Health has acknowledged that there are "shortcomings" in the MTAS process. There is a clear danger that problems with MTAS will tarnish the whole of MMC.[108]

CONSTRAINTS AND LIMITATIONS

69. The introduction of workforce reform and new ways of working has often been subject to difficulties or limitations. The most significant limitation, as we highlighted above, has been the low priority given to reform relative to workforce expansion.[109] As the Department of Health's recent analysis of NHS deficits concluded,

Enthusiasm for making productivity improvements is diminished in an environment of rapid growth in resources.[110]

It is alarming but perhaps not surprising, therefore, that in the context of the sharp expansion in staff numbers and pay levels, workforce reform (which ultimately aims to increase productivity) has received relatively little attention.

70. Worryingly, attempts to introduce new ways of working have been badly affected by recent cuts to education and training provision in response to rising deficits. Cuts to training have affected not only undergraduate training intakes but also training for staff to take on new and extended roles. For example, the Committee was informed of cuts in support for upgrade training for Health Care Assistants, who are well positioned to move into Assistant Practitioner roles, and in training for specialist nursing staff.[111] Education and training cuts have also affected the implementation of the Knowledge and Skills Framework.[112] We comment on education and training cuts in more detail in chapters 3 and 4.

71. The introduction of new roles has also been limited by organisational changes, notably the closure of the MA in 2005.[113] As a result of this change, the Changing Workforce Programme was also closed and the smaller NPP established and hosted at SHA level. Department of Health officials acknowledged that as a result of this change the introduction of new roles,

…has become rather more fragmented than it was and it will be more difficult therefore to coordinate…an overall pattern and there is less capacity behind it as well.[114]

The merging of WDCs with SHAs in 2004 also reduced the effectiveness of the health service at introducing new ways of working, as Department of Health officials again acknowledged.[115]

Conclusions

72. The health service workforce has changed dramatically in recent years, most notably through the major increase in staff numbers which took place between 1999 and 2005. Rapid workforce expansion was a necessary response to the "crisis" in staffing numbers described in the Committee's 1999 report. However, the rate of growth considerably exceeded expectations, and far outstripped the targets set in the NHS Plan. Given the increase in funding levels, such a high level of growth was inevitable. Many new staff were recruited from overseas because of limited availability of UK staff. Eventually, many organisations recruited more staff than they could afford to pay. This was a major cause of the widespread deficits which emerged across the NHS from 2004-05 onwards.

73. In response to the deficits which emerged in 2004-05, the expansion of the workforce has slowed down and, in places, reversed. Overall staff numbers are now falling. Provider organisations have made large numbers of job reductions and some compulsory redundancies and many healthcare graduates have experienced unemployment. Strategic Health Authorities have cut the number of domestic training places, immediately after a period of sustained growth. During the growth phase, employers mainly increased capacity through international recruitment as they could not wait for domestic training output to increase. Now international recruitment has in turn been suddenly and sharply restricted.

74. In parallel with the expansion in staff numbers, pay rates for the majority of health service staff have increased substantially in recent years. Senior doctors have received the most generous pay rises but the Agenda for Change agreement has ensured that virtually all NHS staff have benefited from increases. The costs of pay reform have been extremely high and have absorbed a large proportion of the extra money allocated to the health service in recent years. Actual costs have consistently exceeded Department of Health projections and this has contributed to deficits in some organisations. As with staff numbers, pay growth is now being curtailed with below inflation increases for all staff in 2007-08.

75. There have been a number of attempts in recent years to introduce new ways of working to the health service. A range of new clinical roles have been established in order to increase workforce flexibility, and there have been some efforts to improve retention, increase productivity and reform education and training. However, the scale of progress on workforce reform pales in comparison with the scale of staffing growth and pay increases which took place over the same period. Reform has also been hampered by repeated changes to organisational structures and by recent cuts in education and training provision.

76. There is clear evidence of a boom and bust cycle within each of these areas. The boom occurred between 1999 and 2005 as staff numbers and pay levels increased with unprecedented speed. The emergence of deficits after 2005 triggered the start of a bust phase with widespread job reductions, sweeping education and training cuts and severe pay restrictions. During both phases, workforce changes have tended to respond to prevailing financial trends, and the workforce reform agenda, articulated by A Health Service of all the talents, has too often been overlooked. The expansion of the workforce was reckless and uncontrolled and increases in funding were often seen as a blank cheque for recruiting new staff. Such problems raise serious questions about the effectiveness of the current workforce planning system.

2 Department of Health, Shifting the Balance of Power within the NHS: Securing Delivery, July 2001, pp.4-7 Back

3 Ev 26-27 (HC 1077-II) Back

4 Health Committee, Future NHS Staffing Requirements, HC 38-I, p.xi Back

5 Health Committee, Future NHS Staffing Requirements, HC 38-I, pp.xlii-xliii Back

6 Department of Health, The Government's response to the Health Committee's report on Future NHS Staffing Requirements, Cm 4379, June 1999, p.5 Back

7 Department of Health, A Health Service of all the talents: Developing the NHS workforce, April 2000, pp.5-6 Back