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Government must allocate more funding to meet costs of ending pay cap

The government must increase funding to trusts and boards to meet the new demand after the NHS pay cap is lifted, a think tank has today warned.

Lifting the 1% pay cap could cost between £950m and £2.1bn depending on the proposals put forward, says the Institute for Public Policy Research (IPPR).

The think-tank has looked at two separate models for central government to increase pay over the next two years. First, a ‘catch-up rate’ plan which would see pay rise to the same level as the equivalent private sector staff plus 1%, at a cost of £2.1bn.

Another scenario where wages would increase in line with the Consumer Price Index (CPI) was also analysed. The report concluded that such a plan would require around £950m in extra funding, reduced from the headline cost of £1.8bn through higher tax and lower welfare payments.

Proposals would see money directed towards sectors of the NHS most struggling with recruitment and retention but would require more funding than trusts and boards can currently provide.

Phillippa Hentsch, head of analysis at NHS Providers, has pointed to the report as a positive step forward for the sector. She said pay was just one of a number of factors impacting retention, recruitment and overall staff morale, adding that the current situation is “unsustainable.”

“We agree with the report’s assessment that additional funding will be needed to cover the extra spending required to lift the cap. Trust budgets are already over-stretched,” Hentsch continued. “There is not currently sufficient funding to finance further pay rises, when the NHS faces so many other pressing demands.

“The report rightly points out that when assessing the cost of lifting the pay cap, we need to review the total impact for the Treasury and wider economy not just the headline cost associated.

“The government now needs to set out a clear plan for the promised end of pay restraint.”

RCN chief executive Janet Davies commented: “The report is a timely reminder that previous Budgets forced year after year of real-terms pay cuts on frontline staff. Next month, after already telling the Commons it has scrapped the cap, the government must find the money to make it meaningful for NHS workers.

“The Chancellor should allocate appropriate funding to cover a pay award at the level of inflation – anything less amounts to another pay cut. With unprecedented deficits in the NHS, he cannot ask it to cover pay rises from within existing spending. The NHS must be given new funding to cover the cost.”

Earlier in the month, health secretary Jeremy Hunt confirmed the seven-year cap would be coming to an end next year. He admitted that chancellor Philip Hammond had given him “leeway” to scrap the controversial policy but caused concern amongst health bosses by leaving out plans to fund the new expenses.

When the announcement was made Danny Mortimer, chief executive of NHS Employers, said the NHS was clear that “additional investment” was needed to support any pay above the current cap.

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