Why the government’s pay rise for NHS workers is barely a pay rise at all

We shouldn’t swallow the spin.

NS

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After seven years, the government have finally lifted the NHS pay cap.

Pay in the NHS was frozen for two years from 2011, and increases have been capped at 1 per cent since. Over the period, inflation has whittled away at the real terms value of pay; a nurse today is paid 10 per cent less in real terms than 2011, an eye-watering pay cut of £3,214.

Following years of campaigning and months of negotiations, more than a million NHS staff have been offered a 6.5 per cent pay rise over three years. The government had planned to continue the pay cap until 2020, so this should be seen as a big victory for the NHS trade unions who have fought to scrap the cap.

As IPPR have shown, the pay cap has contributed to a growing NHS workforce crisis – a crisis government could no longer ignore. Net satisfaction with pay has plummeted by 20 per cent in two years. With pay squeezed, and with the growing pressure of working in an over-stretched and under-funded NHS, we have seen increasing challenges recruiting and retaining the staff our NHS needs. More than 33,000 nurses left last year alone.

The government simply could not afford to continue the pay squeeze any longer. While the headline cost of the deal is large – £4.2bn – IPPR analysis has shown nearly half of that cost is returned to the Treasury almost immediately in higher tax receipts and lower welfare spending.

In addition to securing this pay rise, the NHS trade unions have secured additional funding to pay for it. This is vital; with trusts on course for multi-billion pound deficits, funding additional pay rises out of existing budgets would have pushed the NHS to breaking point.

However, while this is a victory for the long campaign to scrap the cap, it is only a partial victory.

First, we should not swallow the spin that many will be getting rises well above 6.5 per cent. While there is a welcome additional boost for some on the lowest pay, the claims of pay rises of 20 per cent and higher are based on including the increment payments many NHS staff receive to reflect professional development.  

Second, while 6.5 per cent sounds good, it is barely a pay rise at all. If inflation matches OBR forecasts, the real-terms pay rise would be just a third of one per cent by 2020/21.

For a band 5 nurse, this would be a pay rise of less than £2 a week. Or, to put it another way, that same nurse would still be well over £3,000 a year worse off in real terms than the same role a decade earlier.

This is not a good sign for the rest of the public sector. The NHS was the area where the pressure for the government to lift the cap was most acute. Public support for scrapping the cap was highest for NHS staff, and the growing workforce crisis was impossible to ignore.

Yet the modest settlement for NHS workers suggests that other areas of the public sector, where the government feels less pressure, will be lucky even to get a pay rise in line with inflation, and lucky to get rises funded by the Treasury.

Most striking though, is what this deal tells us about the government’s view of public sector pay. It is increasingly clear that it sees lower public sector pay as a new normal.

When the coalition introduced the pay freeze in 2011, it was portrayed as an emergency measure to deal with the recession. Yet nearly a decade on, with the recession long over, and with public finances in a stronger position, the government is showing no intention whatsoever of reversing the massive real-terms cuts to NHS pay.

This deal has been hard-won, but it will do nothing to make up for the lost ground as a result of the seven-year squeeze.

That is not sustainable and it is not fair. It was not decent pay for public servants in the UK that caused the global financial crisis. NHS staff – and workers across the public sector – deserve a proper pay rise.

Joe Dromey is a senior research fellow at IPPR