2 The cost of introducing a new contract
for NHS consultants |
13. In the NHS Plan 2000, the Government set out
its policy to have more, better paid staff. The policy was developed
in response to concerns from the medical professions that consultants'
pay lagged behind comparable professions and people were leaving
the profession, particularly through early retirement of consultant
medical staff. It also reflected the views of the general public,
obtained through consultation, that medical staff should be better
rewarded for their contribution to the NHS. From the outset, therefore,
the Department took the view that consultants should have a pay
increase over and above inflation, in the region of 15% over three
years. In the event, the average annual pay awarded to consultants
increased by 27% over the first three years, from £86,746
in 2002-03 to £109,974 in 2005-06.
The total spent on consultants' pay, taking into account increases
in the numbers of consultants and an increase in employers pension
contributions, has risen from £2.9 billion in 2003-04 to
£3.8 billion in 2005-06.
14. In April 2002, the Department estimated that
the new contract would add £565 million to the consultant
wage-bill in the first three years. However, the Department ended
up providing £715 million to fund the new contract, or £150
million more than the Department had estimated it would cost (see
Figure 2). The new contract has consequently cost the NHS
much more than the Department estimated.
Figure 2. The estimated difference between the cost and funding of the new
|Department's estimate of the additional cost (April 2002 business case to Treasury)
|Actual additional funding allocated to NHS
|Increased additional funding provided to NHS
|| 7 ||135
Source: C&AG's Report paragraph 2.3 and figure
6 and Appendix 6
15. The Department increased the funding of the contract
by £150 million in the first three years because the average
number of programmed and level of on-call availability supplements
negotiated with consultants were higher than expected. It later
estimated that the contract actually cost around £90 million
more. This estimate was based on a national survey carried out
by the Department in 2004 which asked trusts about the average
number of programmed activities they had contracted. The Department's
estimations were also based on aggregated data on consultants'
job plans rather than the actual pay bill.
16. The National Audit Office calculated the cost
of employing consultants since 2002-03, using financial returns
from all NHS trusts and some additional data from foundation trusts,
and estimated that the costs were between £150 million and
£200 million more than originally predicted.
Indeed, the view from 84% of NHS trust chief executives was that
the contract was not fully funded. The Department pointed out
that NHS trusts would always say that they wanted more money and
that whilst the contract might have placed financial pressures
on some trusts, many had managed their financial affairs adequately.
17. The Department accepted that the new contract
had cost more than it predicted, but believed that the excess
was due to NHS trusts negotiating a higher than expected number
of programmed activities and emergency on-call activities with
their consultants (Figure 1). Furthermore, the extra
cost of the contract was small compared to the total wage bill,
and difficult to control across 300 organisations. NHS trusts
did not monitor the cumulative cost of what individual managers
and consultants had negotiated and so failed to keep the cost
of the contracts within the funding limits. Since 2005-06, the
average number of PAs that NHS trusts have agreed with consultants
has decreased and therefore the cost pressure has reduced.
18. The Department considered that the implementation
could have been improved by piloting the new contract. It accepted
that it had not always adequately estimated the impact of the
new contract, partly because of the poor quality of the data used.
In particular, much of the data that underpinned the consultant
contract was based on surveys and agreements with the BMA. Over
the last year the Department has introduced new arrangements to
ensure that it costs policies more adequately. It has applied
this lesson in relation to its new contracts for other staff,
such as the Agenda for Change contracts for nurses and healthcare
professionals, which it piloted prior to implementation.
23 C&AG's Report, figure 1; Qq 1, 29 Back
C&AG's Report, para 2.6; Qq 37, 64, 76 Back
C&AG's Report, para 2.3; figure 6; Appendix 6 Back
C&AG's Report, paras 2.2-2.6, 2.9-2.10; Qq 2, 5 Back
C&AG's Report, paras 2.4, 2.6; Appendix 6; Q 4-5 Back
C&AG's Report, para 2.8; Qq 4-6 Back
C&AG's Report, para 2.2; Qq 3, 13-14, 36 60-65, 69, 71 Back
Qq 37, 65-66, 72, 77-80 Back