NHS pay rise to cost extra £1.4bn, says government

The NHS and Department of Health and Social Care (DHSC) face £1.4bn in unplanned costs to cover the recent pay rise for healthcare staff, DHSC has said.

The statement came in dispute of NHS Confederation analysis this week that found the average 5% pay rise for Agenda for Change staff will cost the NHS £1.8bn more than planned. 

The NHS Confederation report found that unexpected costs including the pay rise for NHS staff, the rising costs of energy, and ongoing costs of Covid-19 are leaving the NHS facing real-terms funding cuts of between £4bn and £9.4bn, with ‘impossible choices’ over which areas of patient care to cut.

However, a DHSC spokesperson objected that this was ‘not comparing like for like’, pointing out that since significant additional funding was made available due to Covid last year, it cannot be directly compared to last year.

They said: ‘These claims are misleading. The additional cost of accepting the pay review bodies’ recommendations in full is £1.4bn – equivalent to just 0.8% of the department’s resource budget for this year.

‘Part of this will come from NHSE’s budget, but the rest will be reprioritised through existing departmental funding while minimising the impact to key NHS services. Systems and providers will be funded for the pay award in full on top of existing allocations so they can continue to focus on beating the Covid backlogs.’

NHS leaders had previously warned that there was only funding for a 3% pay rise, and that any additional rise would likely be funded by cuts to services. 

In its report, NHS Confederation calculated that the additional 2% rise above this budgeted limit will leave the NHS with an extra £1.8bn in unplanned costs, which the NHS will ‘have to absorb this within its existing budget’.

The analysis also points out that these unexpected costs leave the NHS far from the Government’s promise of a year on year increase of 3.8% to funding as outlined in last October’s spending review.

Matthew Taylor, chief executive of the NHS Confederation said: ‘We have been calling for the government to help NHS and social care staff with the cost-of-living crisis by increasing their pay, but what we did not expect was that these extra costs would have to come from within the current health budget.

‘Put simply, this wasn’t budgeted for and will have unintended consequences for patient care. This leaves the NHS in a perilous position: either local leaders will have to cut back patient care or accept that waiting times will continue to lengthen.

‘We are already being told that investment in new technology and diagnostic capacity will suffer as a result of this and these are critical areas if we are to reduce the elective and cancer care backlogs. The government has placed the NHS in an impossible position.’