The government should drop national pay agreements for NHS staff and allow each healthcare organisation to negotiate its own deal with employees, a report said today.
The report by the right-leaning think-tank Reform said the change would allow hospitals to reward good performance, introduce innovative working practices and improve care for patients by dealing with staff who are under-performing.
It would also allow trusts to take advantage of the expected surplus of doctors in the UK to “drive down pay” and review the hierarchy of medical ranks in hospitals, said the report.
Consultants should no longer be able to regard their position as a “job for life”, and immigration rules for doctors should be relaxed to give healthcare providers more freedom to recruit from abroad.
Nick Seddon, deputy director of Reform, said that the current pay arrangements were undermining the government’s goal of improving quality and efficiency in the NHS.
He called on health secretary Jeremy Hunt to reject the argument of the umbrella organisations NHS Employers, which wants to maintain national pay arrangements and extend the current pay freeze into a third year.
Pay freezes prevent employers from using their discretion to change working practices or incentivise good performance, warned the report, entitled Doctors and Nurses.
Mr Seddon said: “The current negotiations on NHS pay are a test for the new secretary of state.
“There is a glaring contradiction between his goal of a higher quality NHS and his Department’s support for national pay arrangements.”
Reform said ministers should offer their “full support” for NHS organisations challenging national pay bargaining, such as a group of 20 trusts in the South West which have formed their own consortium to consider breaking away from the national framework.
The report highlights health organisations in the UK, USA and India which have introduced performance-related pay incentives for staff.
It found that local pay agreements can help cut costs, by encouraging higher-quality care, which in turn reduces the expenses arising from medical error.
Unison criticised the “unhelpful timing” of the report. Negotiations are taking place between unions and NHS Employers today, aimed at reaching a national agreement on Agenda for Change.
Christina McAnea, Unison head of health, said: “Reform’s report is writing the wrong prescription for NHS pay.
“It ignores the fact that Agenda for Change has a proven track record of delivering fairness and for keeping the industrial peace across the NHS. The agreement already contains the wherewithal for trusts to link progression with training and development which is instrumental in delivering better patient care.”
Royal College of Nursing chief executive and general secretary Peter Carter said the college “completely rejected” the vast majority of the Reform report.
He said: “Far from leading to a more efficient NHS, local pay would be a recipe for disaster, with damaging implications for local economies and the NHS. Agenda for Change, allied to national pay rates, is a transparent and fair system that also has the flexibility to adapt to changing circumstances.
“It means that in any part of the country, employers know they can recruit staff with the right skills and experience to give patients the care that they need.”
He added: “Local pay bargaining would actually increase inefficiency in the NHS. This is because trusts have to implement their own pay systems, forcing them into bureaucratic and expensive machinery with no economies of scale, which only takes money away from patient care.”