20 April 2007
The controversial NHS consultants' contract introduced in 2003 was a something-for-nothing deal that increased average salaries by more than £23,000 but led to doctors doing less work, the National Audit Office has said.
The spending watchdog also found that the Department of Health had underestimated the cost of implementing the contract for NHS trusts and failed to model their assumptions and costs robustly, leaving them ill-prepared for the £3.2bn increase in their baseline costs.
Comptroller and auditor general Sir John Bourn said: 'Although a new contract was needed, it is regrettable that the costs are higher than expected and that we are not yet seeing any clear evidence of improvements in productivity or services for patients.'
NHS trusts claim that the 27% pay increase was not fully funded and fuelled recent NHS deficits. The DoH initially allocated an extra £565m over three years, and in 2005/06 answered concerns from trusts by allocating a further £150m for that year only.
But the NAO used a 'counter-factual model' – a comparison of costs with what they would have been had the new contract not been brought in – to estimate that the final total of £715m provided by the DoH was just £50m short of the probable extra cost of the new deal.
Under the old consultants' contract, the NHS spent £2.2bn and £2.4bn on consultant pay in 2001/02 and 2002/03 – an increase of 9% between the two years.
But with the introduction of the new contract in 2003/04, pay costs increased by 24% to £3bn and then increased a further 19% in 2004/05 to £3.5bn – £1.1bn above the 2002/03 level.
But Andy Fisher, audit manager at the NAO, told Public Finance it was 'reasonable' to assume that, 'even if there hadn't been a new contract, there were certain cost inflations the NHS would have to have met, including an increase in employers' [pensions] contributions and pay drift' – pay rises for upgraded staff.
By the third year of the new contract the NHS had spent a total of £3.2bn more than it would have done at 2002/03 salary levels.
But the NAO concluded that £2.5bn of that would have happened anyway, as although pay inflation was 11% before the new contract, the 'counter-factual model' should include inflation at 16% because of other unavoidable cost increases.
The new contract intended to increase the numbers of consultants in the NHS and address a 'perceived lack of commitment' of those already there by increasing trust control over their working activities through locally agreed work plans.
While consultant numbers did increase by 11.3%, consultant activity did not keep pace with this and increased only by 4%. The average number of hours consultants spent on private work also decreased by just six minutes from 4.6 hours a week to 4.5 hours.
Health minister Lord Hunt said: 'There is considerable potential for the consultant contract to further improve the management of consultant time and deliver full value for money to the NHS. The report shows that, thanks to the consultant contract, trusts have already taken a more proactive approach to job planning linked to organisational and service objectives and affordability.'
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