Labour needs to be honest about tough spending choices in the NHS

by Peter Watt

It has been a particularly tough few months in the NHS.  Setting aside the impact of the NHS and Social Care Act (2012), the impact of the freezing of budgets is being well and truly felt.  Every week sees another story of a hospital or a patient group in crisis or expressing concern.

July seems to have been particularly difficult.  Early in the month we saw the South London Healthcare NHS Trust being put into administration.  The Trust consists of three hospitals – Princess Royal in Orpington, Queen Mary’s in Sidcup and the Queen Elizabeth in Woolwich and serves more than one million people.

And then this week the South West Pay, Terms and Conditions Consortium, a group of 19 hospitals in the south west, were shown to be planning to cut the pay and conditions of up to 60,000 staff in order to balance tight budgets.  The headlines all warned of doctors and nurses being sacked and of pay and conditions being cut.  I had a special interest as one of the hospitals in the consortium, Poole, was where I nursed and I still have friends there.

According to their project initiation document, the consortium has come together in order to:

“…assist Trusts across the South West in modernising  pay, terms and conditions to ensure that they  are ‘fit for purpose’ going forward.”

In other words they are hoping to challenge national pay and conditions for their staff as a way of bearing down on their staffing costs.  Specifically they are exploring a number of options such as reducing anti-social hour’s payments, some degree of reward for performance for incremental progression, reducing holiday entitlement, increasing hours and reductions in pay for staff on over £21,000.

Unsurprisingly UNISON has responded badly condemning the moves and Andy Burnham said that this was:

“A clear sign of the chaos engulfing the NHS is the move by a break-away group to cut pay and break national pay arrangements – in open defiance of a promise by the deputy prime minister to prevent regional pay.”

But I am not sure that this is true.  The government said that it was not going to cut NHS budgets and has frozen them.  A freeze though is still an effective cut once the impact of health inflation and staff increments are taken into account.  So the freeze has merely reduced the impact of what could otherwise have been even bigger cuts.

In addition, the NHS has to find £20 billion in efficiency savings over the next few years.  Labour also had sizeable efficiency savings planned but has rightly said that it would not have frozen the NHS budget and would have ensured that the NHS would have taken its fair share of the cuts.  By protecting the NHS, other departmental budgets have taken a bigger hit.

In other words, the NHS under Labour would have certainly faced significant budgetary strain and quite possibly even greater pressure.

Yes, there have been additional costs associated with the enforced reorganisation but even if they were not being incurred, the budgetary pressure would still be there.  Even if the economy had returned to growth we would still be facing austerity as dealing with the structural deficit will take more than a few years increase in tax take.

So the NHS, and indeed the whole of the public sector, will face pressure irrespective of who is in government.  And that means tough choices.  The bottom line is that the NHS budget is 60% staffing costs and employs 1.4 million people.  Some management consultants estimate that as many 1 in 10 may need to be but cut.

If you are trying to manage an NHS Trust with a very tight budget and you didn’t look at staffing costs then you would surely be negligent.  To pretend otherwise would be foolhardy or disingenuous.

Of course no one wants to undermine staff pay and conditions but in a tight economy that is what happens in the private sector.  It is not because, as some on the left would like to believe, that private sector managers are bastards determined to screw the workers.  It is hard-nosed economics; if you can’t afford the current levels of staff then you have to cut their numbers or the amount that it costs to employ them or both.

Of course you also endeavour to be more efficient generally and to eliminate waste as well.  Not to do this will put the future of the business and even more jobs at risk.  It would be bad management, irresponsible and quite frankly immoral.

The public sector is now in that position.  It is employing more people than it can afford and it has to cut numbers of staff and their conditions as they try and stay within smaller budgets.  Waste can be eliminated and efficiencies found – but it won’t stop then needing to take decisions about staff.

And it was Labour that brought in greater and greater localisation of the public sector.  From NHS Trusts to school academies, budgets and decisions have been localised.  And with it so has the ability of local management to set some degree of local pay and conditions.

To date the threat of the unions has meant that this power has been used sparingly and anyone trying anything ‘radical’ faced a backlash from the unions and they have backed down.  As budgets continue to be squeezed across the public sector, initiatives like the South West Pay, Terms and Conditions Consortium are inevitable.

There may well be safety in numbers as employers need to take on the unions if they are to give themselves more flexibility.  And as both a significant budget squeeze and increasing localisation were both policies that Labour also advocated, it is hard to see how Labour can attack the proposals with a straight face.

If Labour is to be trusted on the economy then the bigger issue is when is the party going to start being honest about the fact there will also need to be some pretty tough budget cuts should Labour win the next election.  And also that the implications for staff and service users may well be unpleasant.

The Labour party is going to have to face up to this ugly truth at some point – it’s a matter of fundamental trust.   And that is something that the public are in very short supply of when it comes to the political parties.

Peter Watt was general secretary of the Labour party

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6 Responses to “Labour needs to be honest about tough spending choices in the NHS”

  1. Mouth of the Umber says:

    Or you have to find imaginative ways of generating addition income steams.
    You remind me of Dr. Beeching – I feel sorry for his relatives – who was described as a hero for saving the railways ! ! !
    I could have done that, just look at the profit and loss accounts and then close the loss making lines.
    But managers are played huge salaries for responcibilities and they include the responcibility of going out and finding new income streams.
    In the case of Dr. Beeching I would have a lot more respect if he had gone out and found new and innovative ways of generating more income.
    You should take the ‘slash and burn’ blinkers off. We have a bizzare belief that Public Services are not allowed to create a profit that could be fed back into loss making Public Services.

  2. robertcp says:

    Do voters really want political parties to be honest about cuts? It is too soon for Labour to be saying what it will do after 2015 in any case.

  3. MickleMas says:

    If Labour is to return to power in 2015 it needs to convince the public they are on their side and will enact legislation and policies that will protect their standards (which, for the most part, mean defending public sector values). Your approach not only undermines voter optimism in the credibility of a future Labour government, it justifies the ‘austerity’ regime imposed by this Coalition government and supported by our right-wing media (including the BBC) and other right-wing organisations like the IMF and Merkel’s government. Ed Miliband should be declaring to the public that “although the country needs to reduce its debt, Labour are determined to do that with as little harm to public services as possible.” Defending public services like the NHS and police is the answer to electoral success, not, as you suggest, ‘accepting pain’.

  4. ThePurpleBooker says:

    Peter Watt is wrong on NHS cuts. The Government has frozen services but they have sent any underspend directly to the Treasury. Also, services are being cut by the Government. Like Peter Watt I am on the right of the party but I think you should not try and agree with the Government at very angle even though it is just wrong. Does not boost your Blairite credentials.

  5. BenM says:

    “Some management consultants estimate that as many 1 in 10 may need to be but cut.”

    This line made the whole argument simply worthless.

    Who cares what management consultants think?

    They are not health specialists. They’re not even specialists in the fields they claim to be specialists in.

  6. Cathrine says:

    Of course labor need to be honest…
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