17 July 1998
Launching his Comprehensive Spending Review, the chancellor announced an extra £21bn for health and £19bn for education over the next three years. But he wants this money to be spent on cutting waiting lists, introducing new technology and cutting class sizes rather than pay.
Mr Brown said the bodies that recommend pay rises for more than a million public sector workers would have to take account of the government's 2.5% inflation target. This is not a new message for the review bodies – before the last pay round the Treasury leaned heavily on them not to recommend above-inflation awards. When the bodies ignored this the government chose to pay the rises in stages.
Ministers have reportedly acknowledged in private the need to relax controls on public sector pay and they are considering a plan that may enable them to do so. Public Finance has learnt that next February's health review bodies' recommendations could be the last. Health ministers are considering overhauling the NHS pay awards system and creating a single review body, tentatively called the NHS Pay Commission. This would be divided into three divisions – doctors and dentists, nurses and midwives and non-clinical staff.
Before the new system is launched the NHS would undertake a job evaluation exercise. This would undoubtedly recommend pay increases for many non-clinical workers and some nurses. The money to cover the rises could come from the chancellor's £5bn modernisation fund. Effectively, the government would be funding pay rises through the back door. By avoiding increasing salaries across the board in the annual pay round some hope they will not stoke up an inflationary pay spiral.
The NHS Confederation was concerned the £21bn boost handed to the health service would lead to pay inflation. 'It is important we have a fairer pay system in the NHS,' the confederation's chief executive Stephen Thornton said. 'But this must not mean runaway pay awards. We welcome the new framework announced for pay review bodies whereby they will have to take into account the government's inflation target each year.'
But there was concern that tightening public sector pay would make it difficult to cut waiting lists and introduce the government's reforms. Karen Caines, the Institute of Health Services Management director, said: 'Being tough on public sector pay might backfire at a time when the NHS already faces a critical shortage of doctors and nurses, and the government is looking for productivity increases. Investing in staff is as vital in the NHS as investment in buildings and IT.'
Doug McAvoy, National Union of Teachers general secretary, said proper pay for teachers was needed. 'Hand-picking a few to receive a respectable income will not make the profession attractive to highly-qualified young people,' he said.
There was also concern over the independence of the review bodies. David Hart, general secretary of the National Association of Head Teachers, warned that tampering with the freedom of the School Teachers' Pay Review Body would be 'totally and utterly counter-productive'.
Unison said it would seek clarification of the review bodies' new role. 'Our concern centres on the threat to their independence,' said Bob Abberley, the union's head of health. 'It is important that the nurses' and health professionals' review bodies are free to recommend fair rewards, with affordability remaining the responsibility of the government.'
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