Finance: Costly side-effects

Public sector finance Due to staff shortages local pay bargaining may backfire on NHS trusts. By Paul Gosling

Local pay bargaining in the NHS, which begins properly for the first time this week, may prove a poisoned chalice for trusts. Both employers' advisers and unions say that staff shortages could lead to some high pay awards, reflected in the national pay claim of 6.5 per cent, more than twice the rate of inflation.

NHS trusts had budgeted for a 2.7 per cent pay increase for the new financial year and were disappointed by the awards agreed by the pay review bodies.

Doctors, who are not subject to local pay bargaining, have been given rises above this level. Consultants have a two-stage increase, starting at an extra 2.8 per cent from April, rising to 3.8 per cent from December. Junior doctors' increases will be between 4.3 and 5.8 per cent from April, with an extra 1 per cent in December.

Nurses' and midwives' pay increases should also exceed the rate of inflation as a result of local bargaining. They will get a national 2 per cent increase, plus whatever can be obtained locally. As a result of a framework agreement signed last September, the average increase achieved in local negotiations will be built into the national pay tables, thereby ensuring a continuation of an element of national pay bargaining.

"This is the first year that real local pay negotiation takes place," says Sarah Silcox, editor of the IRS Health Service Report. "Last year it was very limited." Ms Silcox predicts that unions will use a pattern bargaining strategy based on that used in industry.

Negotiation will be delayed with trusts that have weak finances, while those that are better off - having been allocated more government money as a result of expanding populations - will be pushed to award higher increases. Those will then be used as the basis for negotiation elsewhere.

"Whether that can work in the public sector, where those who can't afford it just can't afford it, is the question," suggests Ms Silcox. Trusts' hands have been tied by not being able to trade off changes in working conditions against pay rises, she points out.

The unions argue that trusts have little option but to pay higher increases than planned. Bob Abberley, head of Unison's health group, says: "Trusts are very nervous. They are taken aback by the size of the national element."

Unison says that is absurd that the Government has introduced local bargaining at the same time that nursing has its biggest staff shortages since 1988, when an additional pounds 1bn had to be injected to attract more nurses. It adds that trusts are already leap-frogging each other in areas where there are severe recruitment problems.

"We will play one trust off against another. That is what local bargaining is, what they expect us to do," adds Mr Abberley. "We are better prepared than they are. They will have a rough ride."

Trusts fear that Mr Abberley may be right. Philip Hart, director of the National Association of Health Authorities and Trusts, is pushing trusts to join their local pay forum, which could form the basis of a national pay forum.

It is only then, Mr Hart argues, that trusts can effectively influence the outcome of the pay review bodies, help to introduce more nurses into the profession by addressing national problems of recruitment, and increase local pay flexibility. Mr Hart points to the South-west's Pay Forum as an example of how a national pay information service might work. Mike Withyman, the Pay Forum's pay information and research manager, agrees that trusts are worried that the staff side is better prepared than management.

"The employer's side wants to be given the same information," says Mr Withyman. "Trusts feel they need to network on this. They don't want to get into a pay spiral, with the staff side playing them off against each other."

The biggest challenge facing the unions is maintaining a joint campaign. Unison insists they can. Bob Abberley says: "We have got our act together, we are all together. There are no arguments on the local staff sides. There will be no opportunity for divide and rule."

But the Royal College of Nursing admits that the unions have different priorities. While Unison is pushing for improvements for their lower paid members, the ancillary workers, the RCN is solely interested in the welfare of nurses. The RCN is just as interested in improving job security by phasing out temporary contracts as it is in raising pay. "There will be horse trading at a local level between unions," says an RCN spokeswoman.

There is long-standing mutual distrust between Unison and the RCN. There is even a feeling within the RCN that Unison is happy with the loss of national pay bargaining, which may lead to higher pay offers. The RCN remains totally committed to the use of pay review bodies and a single national pay system for nurses.

When the Government pushed for local pay bargaining it was expected it would lead to lower pay settlements. It is ironic that it now appears that the opposite may be the case, not least because it is the unions rather than the trusts that are the better prepared.

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