Health policy debate
4 to 15 November 2005
Performance
Debate continues about rising public sector pay
Business writers have turned again to an examination of public sector pay after Office for National Statistics data showed that public sector workers are continuing to widen their pay lead over the private sector.
Writing in the Independent, Jeremy Warner said, ‘the reversal has been widely condemned as iniquitous. Who's paying for whom, the leader writers have thundered, and with some justification. The civil servants have more job security than us, their jobs are less stressful, they retire earlier, they have better pensions, they can apparently expect to live longer than their private sector counterparts, and now it appears they even earn more. Who in their right mind would want to carry on labouring away in the private sector paying for the better conditions and earnings of the public sector when you can go and work there yourself? Quite so.’
‘Yet as ever, the bald statistics hide a more complex picture. One of the main reasons for the reversal - possibly the major reason - is the large number of low paid, unskilled jobs that have been transferred from the public to private sector through outsourcing. This obviously depresses average pay in the private sector while raising it in the public.’
‘What's more, many public sector jobs, particularly those in healthcare and education, are of a type which are bound to see very considerable wage inflation in any case. These are high skill jobs providing services for which there is burgeoning public demand. If they were provided through the private sector, with the services bought directly by consumers rather than paid for through taxes, it is almost certain that rates of pay would be higher - possibly, as in the privately funded American healthcare system, a lot higher. That we might also get better value for money from such an approach is a different issue’.
‘Most, though by no means all, public sector jobs still lag their direct private sector counterparts on pay by some distance. A human resources director in a major government department is likely to be paid a lot less than the equivalent at Goldman Sachs or even B&Q’.
‘All this helps explain the reversal in the historic relationship between public and private sector pay. Yet it hardly justifies the phenomenon if what is going on is essentially unaffordable. These are, of course, the $64,000 questions. Can Britain really afford these massive increases in public spending and are they in any case the best way of delivering the services provided?’
The second of these questions is political in nature, but the first is very much economic. If they prove unaffordable, then eventually the markets will punish Britain for its profligacy and everyone will end up the worse for it. There is something self-evidently wrong about a system that makes those who provide the taxes earn less than those paid for by them. Any such disparity must ultimately be unsustainable, if only because the tax paying private sector will eventually rise up in rebellion against it. The wealth creators will vote with their feet and their employees will vote for another government [go to note 11].
Better financial management in primary care is a priority for reform
Internal documents leaked by the Health Service Journal set out plans for better budget management in primary care, from where the majority of secondary care is commissioned.
Sir Nigel Crisp suggests that the newly formed PCTs (post-reconfiguration) need to prove they deserve financial autonomy and he floats the idea that SHAs would ‘not allow new PCTs full control of their budgets until they are able to demonstrate the ability to deliver the financial plans for 2006-7 and 2007-8’.
The document acknowledges existing financial problems, despite extra investment. It notes that ‘increased income has sometimes allowed people to forget good financial discipline’.
Crisp divides the decade in financial phases: 2000-4 ‘building capacity and capability’; 2004-8, a period of ‘benefits realisation’; and 2008019, when ‘reduced growth, continuing above inflation in a sustainable system’ is expected.
It proposes that all NHS organisations must have ‘a plan to break even in 2006-7 and ‘aim for, say, a surplus of one per cent in 2007-8 to carry forward’. The paper concedes there will be some ‘pain’ will be caused by slowing expansion in the acute sector. The intention, says the paper, is to soften the blow of slackening NHS funding in 2005 and ensure that all organisations ‘balance the books on an annual cycle’ [go to note 12].
‘A DoH spokeswoman said: ‘we do not comment on leaks. However, we have made it very clear that NHS organisations are expected to plan for, and achieve, financial balance each and every year and that it is the responsibility of SHAs to deliver overall financial balance for their local health
communities’ [go to note 13].
