Pay 08: NHS pay

Pay is an important issue for CSP members, as it is for other health service colleagues. Quite apart from determining whether you can pay your bills and maintain or improve your lifestyle, pay matters because the level of your pay carries with it an indication of how much you are valued by your employer and Society. For many people, therefore, pay is a measurement of worth.

"We work harder, follow Government policies and provide an excellent service within our limited resources. We must be adequately remunerated – bills go up and our pay rise doesn’t even cover that. Senior staff are already leaving and more will follow if we do not get a fair pay rise." - CSP member

If pay levels do not keep pace with inflation, or if they contribute to a sense of being undervalued, low morale is inevitably the result, and this dissatisfaction can lead to other consequences for both the individual and the employer, including loss of motivation, stress-related illness, recruitment and retention problems and industrial unrest.

The pay offer

The pay offer for 2008, on which thousands of CSP members voted, is part of a three-year package:

Future talks

The pay package also includes:

• an agreement to hold further talks within the three year period on proposals to reduce the number of incremental pay points (starting with Bands 6 and 7) that are affordable within the context of future pay awards
• a promise to consider the trade unions' claim for a reduction in the hours of the working week, in conjunction with further discussions on productivity improvements within the NHS
• a commitment to working in partnership to continue to increase the number of apprenticeships in the NHS, in line with Government policy
• a revised facilities agreement for NHS staff
• work-life balance and well-being statement

There is provision for the Pay Review Body to review pay rates in years 2 and 3 should there be "a significant and material change in recruitment and retention and wider economic and labour market conditions". The decision on whether to do this will be down to the Pay Review Body. In the event of the PRB making a recommendation for a further pay increase, it will then be up to Government to decide whether to accept the recommendation or not.

The offer was tabled as a package offer and the government made it clear that it reserved the right to reconsider its response to the Pay Review Body's recommendation of 2.75% for 2008/9 if the package was not accepted.

CSP position

Immediately after the pay proposal was tabled, the CSP issued an interim joint statement with six other health unions representing professional staff in the NHS: Unite, the Royal College of Midwives, the Society of Radiographers, the Society of Chiropodists & Podiatrists, the British Orthoptic Society and the Federation of Clinical Scientists. The statement read:

"We would accept the NHS Pay Review Body's recommendation of 2.75% on NHS staff pay for 2008/09 because of our commitment to the independent pay review body process. However, the proposed offer of 2.4% and 2.25% for years 2 and 3 after the PRB recommendation gives us great cause for concern as the current uncertain economic situation leads us to believe that it would not meet our members' expectations and would represent a real terms pay cut for our members."

On 15 April, the Pay Reference Group (PRG) of the Society's Industrial Relations Committee met to formally consider the offer. The view of the PRG was that the proposed 2.75% increase for 2008/9, while low, was reasonable given that this was what the Pay Review Body had recommended and was higher than the ceiling of 2% being urged on the Pay Review Body by both the Department of Health and NHS Employers.

However, the PRG considered the remainder of the package to be unacceptable because it:

• Fails to protect members' pay against inflation;
• Locks us into a three year agreement at a time of great economic uncertainty and with no guarantee of being able to re-open pay talks before 2011;
• Discriminates against more specialist clinicians by focusing pay band improvements on bands 1-3 and 5;
• Pushes the costs of restructuring Band 5 into year 4, potentially cutting the monies available for future across-the-board pay rises in 2011/12;
• Compromises the independent Pay Review Body process for a second year running because of the threat by Government to interfere with this year's PRB recommendation if the 3 year package deal was not accepted.

Explaining the Pay Reference Group’s recommendation to reject, Alex MacKenzie, Chair of the CSP Industrial Relations Committee, said:

"As the CSP supports the Pay Review Body process we can accept the review body's recommendation of a one year pay increase of 2.75%. What we cannot accept, however, is being pushed into - at a time of great economic uncertainty - a 3-year deal of decreasing value. A pay award worth less and less over time is not in our members' best interests and will do nothing to improve morale, which is already pretty poor. We have an opportunity to send a strong message back to Government about how valued we feel. Let's not waste this chance to make our voice heard."

The CSP’s consultation closed on 30 May. Over 98% of CSP members working in the NHS who voted in the consultation voted to reject the 3-year pay offer.

The Pay Review Body (PRB) process

Pay for physiotherapists, physiotherapy assistants and technical instructors in the NHS is determined by the Review Body for Nursing and Other Health Professions.

The Pay Review Body (PRB) appraises written and oral evidence from the Health Departments of the four UK countries, the NHS employers and the health unions before making its recommendation to Government.

Every year, the CSP submits evidence to the Pay Review Body (PRB) as part of the formal process for determining the pay of NHS staff. Two sets of written evidence are normally compiled for the PRB by the Society: the CSP’s own evidence, relating specifically to physiotherapists, physiotherapy assistants and technical instructors, and a joint set of evidence submitted with all the staff side organisations.

The process of submitting evidence begins around late spring to early summer, when the CSP reviews what the Pay Review Body said about our previous year’s evidence. The CSP identifies the key issues that need covering, whether we need to conduct surveys, and how we will write each chapter of evidence. The 2008 evidence, for example, included a survey of CSP members covering working hours and motivation and morale, and also reflected individuals’ comments on the staging of the 2007 award in England.

The writing of the CSP’s evidence goes through a process of careful deliberation and revision before, after numerous drafts and comments from the Society’s Pay Reference Group (a sub group of the Industrial Relations Committee), it is formally submitted to the PRB. In the case of the unions’ joint evidence, this is discussed and agreed by the Staff Side of the NHS Staff Council.

The next stage in the process is when the Pay Review Body calls on the CSP independently, and the unions jointly, to present their evidence in person so that the members of the PRB can ask any questions or seek points of clarification. For our part, the CSP is able to comment specifically on evidence submitted by the government health departments and NHS employers.

Following these meetings, the PRB may call for further details or clarifications before making its recommendations to Government. The PRB also arranges visits to NHS hospitals and other facilities so that its members can quiz NHS staff directly.

Since 2006, all pay rises have been overseen by the Government’s Public Sector Pay Committee, which was established to give greater co-ordination and control of pay decisions across the public services. This committee is made up of ministers and senior civil servants and it assesses specific proposals for pay increases against Government pay objectives, and recommends whether they should be approved.

The final stage of the process is when the Government announces its response to the PRB’s recommendations: it can accept them and implement them in full, stage them or reject them altogether. The onus is then on the trade unions to accept or reject the Government’s ‘offer’. Traditionally, the unions accept the PRB recommendations as we subscribe to the pay review body process of producing evidence and submitting that evidence to an independent body for review and adjudication.

NHS pay awards 1998-2008

Year	Pay award %	Inflation (RPI, April) %
2008	2.75%	4.2
2007	2.5 (Eng: 1.9)	4.5
2006	2.5	2.6
2005	3.225	3.2
2004	3.225	2.5
2003	3.225	3.1
2002	3.6	1.5
2001	3.7	1.8
2000	3.4	3.0
1999	4.7	1.6
1998	3.8	4.0

Rising living costs and inflation - the CPI v the RPI

Inflation is the measure of the increase in prices of particular goods and services, normally expressed as an annual percentage increase.

In the UK, the two most common measurements (indices) of inflation are the Consumer Price Index (CPI) and the Retail Price Index (RPI). Both measure the average change in prices of a ‘basket’ of goods and services consumed by most UK households based on average household expenditure. The Retail Price Index (RPI) includes housing costs (mortgage payments and council tax) whereas the Consumer Price Index (CPI) does not.

Union pay negotiators and many economic commentators favour the use of the RPI as a more realistic and accurate reflection of the cost of living. Despite the RPI being used to index pension payments and other state benefits, the Government’s preferred measure of inflation is the Consumer Price Index (CPI). This lower figure – lower because it excludes the cost of housing – is the one you’ll see quoted as the official rate of inflation.

The Office of National Statistics (ONS) establishes the CPI/RPI by tracking the prices in a ‘basket’ of approximately 650 goods and services and then weighting the price changes according to their importance (food, for example, is seen as important, so food gets a bigger weight than other items). To reflect changing times and consumer preferences, items in the basket are reviewed and changed each year: MP3 players were included for the first time in 2006, for example.

As no two households spend their money in exactly the same way, however, everyone’s experience of inflation will be different. But if a large proportion of your income is spent on food, energy, petrol or public transport, chances are you’ll be feeling a squeeze on your purse or wallet as these prices have been rising significantly above the rate of inflation, whether measured by the CPI or RPI. For example:

• Energy costs: some energy companies have announced increases in electricity and gas of 10% and 15% respectively;
• Public transport: rail fares have risen by an average of 4.8% (with far higher rises for some rail users);
• Drivers: petrol is approximately 46% more expensive than it was five years ago, from 71p/litre in 2003 to 104p plus/litre now;
• Food: food prices have risen by an average 6.6% according to official figures. Commodities such as wheat and rice have risen steeply while dairy prices – milk, cheese and eggs – have increased by 15.4% since January 2007. Meat prices have risen by up to 7.8%;
• Water: Ofwat, the water regulator, has announced that the average water bill will rise by 5.8% in 2008

Government inflation target

The pre-Budget report of October 2007 announced by the Chancellor committed the Treasury to “public pay settlements consistent with the government’s achievement of the government’s inflation target of 2%”.

For the Government, there is a causal link between the level of public sector pay and inflation. But is this correct? A number of eminent economists beg to differ:

"They [public sector pay rises] have nothing to do with inflation. It is the things that are produced by the private sector that go into the calculation of inflation – hair cuts, potatoes." - Stephen Nickell, head of Nuffield College, Oxford, and a specialist in labour economics, Financial Times 10 January 2008

"Inflation comes from letting demand rise too rapidly before production. What I really can’t believe is that, when private sector pay rises are 4 per cent, a rise of 2.5% for the public sector is inflationary." – Martin Wheale, director of the National Institute of Economic and Social Research, Financial Times 10 January 2008

"An undergraduate who wrote in an essay that inflation was caused by public sector wage rises would receive a ‘fail’." – Andrew Oswald, Professor of Economics, Warwick University, Financial Times 9 January 2008

There is very little evidence to support the Government’s claim that public sector pay rises of 2% or above would fuel inflation. This is a red herring: the real reason for the Government’s 2% public sector pay policy is to address problems in the public finances - its about saving money.