Executive Summary
National Audit Office Value for Money Report
- Implemented between December 2004 and December 2006, the
objective of the Agenda for Change programme was to reform and
standardise the pay and conditions of around 1.1 million staff in
the NHS in England, representing a pay bill in excess of £28
billion a year in 2007-08 (see Box 1). Agenda for Change covers
most staff within the NHS. Consultants and other doctors and
dentists have been subject to their own pay reform programmes.
- enable staff to give their best for patients, working in new
ways and breaking down traditional barriers;
- pay fairly and equitably for work done, with career progression
based on responsibility, competence and satisfactory performance;
and
- simplify and modernise conditions of service, with national
core conditions and considerable local flexibility
- There was widespread agreement within the NHS that a new pay
system was needed. The old system comprised numerous pay structures
covering 54 professions plus technical, administrative, maintenance
and other support staff. There were a multitude of separate
allowances ranging from, for example, ‘radiation protection
supervisors allowance’ to ‘authorising clerks allowance’. Different
staff groups were entitled to different amounts of leave and
different length working weeks; and there were a multitude of shift
patterns and on-call arrangements and payments. The lack of
comparable terms and conditions across all staff groups created
barriers to developing new roles for staff and new ways of team
working. The lack of consistency in determining pay also led to
equal pay claims.
- National negotiations for a new reward system started in 1999,
and were carried out by the Department of Health and its
counterparts in Scotland, Wales and Northern Ireland; the NHS
Confederation (the employers’ representative body); and trade
unions. Final agreement was reached in late 2004. By March 2006 the
vast majority of staff in England had moved on to the new
pay bands.
- To implement Agenda for Change, each NHS organisation was
required by the Department to evaluate all jobs, either through
matching them to national NHS job profiles or through local job
evaluation. The process is described further in Figure 2, page 13.
The job evaluation scores determined the pay band for each post.
Trusts then had to update the payroll details of all the staff
concerned with new pay rates. Once this process was complete each
NHS organisation was expected to use the Knowledge and Skills
Framework to review the skills of all staff to identify and address
development needs to allow them to perform better (as described in
Box 1).
Figure 1 "Pay modernisation for all staff except
doctors" is unavailable in this version of the executive
summary
- This report is the third in a series of National Audit Office
reports on NHS pay modernisation in England, the first looked at
the new contract for consultants (published April 2007); while the
other examined the new contracts for general practice services
(published February 2008). This report examines the implementation
and costs of Agenda for Change and the implementation of the
Knowledge and Skills Framework. It also assesses whether the
intended benefits have been achieved and identifies some of the
barriers to fully realising them. Our analysis and findings relate
to the application of Agenda for Change as a whole, but we make
particular reference to the nursing profession since it is, by far,
the largest pay group, accounting for 40 per cent of the total
annual pay bill. Nurses’ terms and conditions of employment were
also used as the central reference point for the work to harmonise
the terms and conditions of the many other groups of staff covered
by Agenda for Change (see Box 2 overleaf). Our methodology is
detailed in Annex 1 of this report.
Figure 2 "Nursing and agenda for change" is
unavailable in this version of the executive
summary
Key Findings
Implementation of Agenda for Change
- The Department initially set a deadline of 30 September 2005
for trusts to set up the job evaluation scheme (including training
staff), to evaluate posts, and to transfer staff to their new
Agenda for Change pay points. The task, however, was a large one
and this deadline, ten months after the final agreement had been
reached, proved unachievable. The Department continued to monitor
progress closely and by March 2006 ninety-nine per cent of staff in
England had been transferred to their new pay points.
- By October 2007, 41 per cent of NHS staff had received a
knowledge and skills development review in the last 12 months. The
process was a new experience for many staff and take up was slower
than expected. As a consequence of the slow implementation of the
Knowledge and Skills Framework, the Department re-launched it in
November 2007; and in May 2008 the Parliamentary Under Secretary
for Health Services wrote to all NHS organisations emphasising the
need to use the Knowledge and Skills Framework. At the time of our
fieldwork in August and September 2008, the proportion of staff who
had had a knowledge and skills review had increased to 54 per cent.
Cost of Agenda for Change
- The strategic plan for the NHS (NHS Plan 2000) set out clearly
the Department’s intention to increase pay in the Health Service in
order to improve recruitment and retention of NHS staff. The annual
cost of employing staff on Agenda for Change in the NHS (England)
rose by £7.4 billion (36 per cent) from £20.8 billion in 2003-04 to
£28.2 billion in 2007-08. Some 13 per cent of this additional cost
is due to growth in the Agenda for Change workforce, and a further
22 per cent is due to an increase in employers’ contributions to
the pension scheme from 2004-05. The remaining 65 per cent reflects
higher levels of pay, through pay awards, effects such as pay
progression as people move through the pay system, and the impact
of Agenda for Change. The Department does not believe it is
possible to isolate the total cost to date of Agenda for Change
from other elements of the pay bill. [Footnote 1]
- We have estimated the impact of Agenda for Change for each of
the five years from 2003-04 to 2007-08 by comparing the actual pay
bill with a model which makes two different assumptions of what pay
growth might have been without Agenda for Change resulting in two
counterfactual scenarios. In 2007-08, we estimate that the annual
pay bill was between £166 million (0.6 per cent) higher and £239
million (0.8 per cent) lower than it might have been had Agenda for
Change not been implemented.
- Both scenarios start with a saving of £374 million in 2003-04.
This saving may have been due to reduced pressures on pay while
Agenda for Change was being negotiated. After 2003-04 our first
scenario suggests that Agenda for Change added a cost to the NHS
pay bill each year, although the rate of increase declined in
2007-08. Our second scenario shows added costs for 2004-05 and
2005-06 and savings thereafter. The costs of Agenda for Change are
explored further in paragraphs 2.15 to 2.19.
The benefits of Agenda for Change
- Agenda for Change provided NHS trusts with the opportunity to
look at how their services were staffed and to think about how
these services might be delivered better with different ways of
working. Trusts report that because of the timetable for
implementation of Agenda for Change, they did not have the capacity
to fully consider how they would develop benefits locally, for
example by using the job evaluation process to design new roles.
Most staff are not working sufficiently differently from when they
were on their old pay contracts and as a consequence staff
initially received increased pay for doing their
existing roles.
- Agenda for Change was expected to help increase the numbers of
people wishing to work in the NHS, but staff numbers had already
peaked by the time Agenda for Change was implemented. Numbers of
NHS staff working in grades covered by Agenda for Change rose from
0.92 million in 2000 to 1.13 million in 2005 when Agenda for Change
was implemented and have since fallen to 1.09 million. Agenda for
Change was expected to help improve staff morale and, whilst staff
morale is a complex issue affected by other events, including the
drive to reduce financial deficits, Healthcare Commission NHS staff
surveys show that job satisfaction did not improve between 2004 and
2006 although there were improvements in some areas in 2007.
- There is a widespread view in the Department and amongst NHS
Employers and other commentators that Agenda for Change has made it
easier to show that NHS pay is fair and equitable. A test case is
being heard by the Employment Tribunal and is due to conclude in
February 2009, though it could be prolonged if any issues are
subject to appeal.
- Agenda for Change was also intended to contribute to
improvements in equal opportunity for NHS staff. The Healthcare
Commission’s annual surveys of NHS staff show that the proportion
of staff who believe their employer does not act fairly with regard
to career progression or promotion has not decreased.
Benefits yet to be realised
- Agenda for Change and the Knowledge and Skills Framework were
expected to facilitate new ways of working within the NHS, which
would contribute to improved quality of care for patients and
delivering services more efficiently and effectively. These changes
were to be achieved by using the job evaluation scheme, to design
and evaluate new roles, and the Knowledge and Skills Framework to
help staff to develop competencies.
- Around half of trusts reported to us that they have used Agenda
for Change to improve clinical pathways by creating new roles for
staff. This picture was supported by evidence at trusts we visited.
Most commonly these were ‘assistant practitioner’ roles where less
qualified staff take on work from nurses (or other healthcare
professionals) and ‘advanced practitioner’ and ‘nurse consultant’
roles, where senior professional non-medical staff take on
responsibility for tasks formerly carried out or supervised by
medical staff, such as prescribing.
- There is a perception among some managers and staff that the
Knowledge and Skills Framework is complex and burdensome. In the
trusts that have maximised use of the Framework, there has been a
management commitment to making the system work, and staff and
managers have received adequate training and are given time to
carry out the process. A small number of trusts have integrated the
Knowledge and Skills Framework into their performance management
systems. They are better placed to use the annual review to assess
performance in carrying out important daily tasks, as well as to
review the application and acquisition of knowledge and skills over
the year.
- The Department expected that Agenda for Change would result in
a 1.1 – 1.5 per cent year-on-year rise in productivity (the ratio
between the quantity of healthcare provided by the NHS and the
volume of resources being used by the NHS). This rise was planned
to contribute to net savings of at least £1.3 billion over the
first five years of Agenda for Change, and some of these gains were
expected to be from higher quality of care, according to the
Department’s Business Case to the Treasury. The Department has not
carried out a specific exercise to demonstrate the productivity
savings resulting from Agenda for Change nor have trusts attempted
to measure the resulting efficiency or productivity gains.
Without the means to measure the specific impact of Agenda for
Change it is not possible to determine whether the productivity
savings have been achieved.
- The more general measures of NHS productivity and efficiency
that are available do not take account of changes in quality of
services and cannot easily be disaggregated to show the specific
impact of the programme (paragraphs 3.13 to 3.19). The best
available productivity statistics for the NHS as a whole are
compiled by the Office for National Statistics. This measure shows
NHS productivity declined by 2.5 per cent per year between 2001 and
2005, as the growth in the amount of healthcare provided was
overtaken by the more immediate growth in resources used by the
NHS. Between 2005 and 2006, growth in inputs slowed more quickly
than growth in output, so productivity fell by only 0.2 per cent
that year. This measure of productivity needs to be considered
alongside other corroborative data which suggest that productivity
has declined a little less steeply than the crude measure suggests.
The Department has measured efficiency gains on a project by
project basis, but these do not take account of the increased
resources used by the NHS overall.
- Agenda for Change does make it easier for managers to estimate
costs now there are common staff terms and conditions. It is also
simpler for budget holders, such as ward managers, to understand
and monitor their budgets. In addition there is now a single
process for determining pay increases for all staff, except
doctors, dentists and senior managers.
- Agenda for Change is a system which aims for consistency across
the NHS. It is unclear how the relevance of Agenda for Change will
be affected as the NHS moves further towards greater local
management, competition and choice. Foundation Trusts have the
freedom to use local terms and conditions. None-the-less even if
they choose to use these freedoms and flexibilities, Agenda for
Change should offer a shared baseline to develop a transparent
system for evaluating roles.
Conclusions on Value for Money
- The Department and NHS, in partnership with the trade unions,
successfully implemented Agenda for Change for some 1.1 million
employees, doing so within a short timescale. The new system gives
the NHS a single and transparent system for employing staff, and
simplifies significantly the administration of pay within the
NHS.
- Achieving the benefits of Agenda for Change was predicated on
staff working differently to deliver improvements to patient care
and improving productivity in return for better pay. Measuring
productivity benefits would have required trusts to have developed
productivity measures when they introduced changes in the way staff
work. The Department did not put in place the necessary
arrangements with trusts, so the Department has limited evidence to
show what impact pay modernisation has had on productivity. The
Department’s Business Case in 2002 estimated that Agenda for Change
would result in net savings over the first five years of at least
£1.3 billion. Specifying a level of savings in this way was
unrealistic since the Department placed no requirement on trusts to
achieve efficiency or productivity improvements locally as part of
implementing Agenda for Change. While in this period the Department
can show some efficiency savings generally, as recorded by the NAO
in its report "The Efficiency Programme: A Second Review of
Progress Report" (HC156, 2007), the Department cannot demonstrate
the contribution that Agenda for Change has made to their
achievement.
- For most trusts, the Agenda for Change programme largely
stopped at the point when staff transferred to their new pay
bandings, with the Knowledge and Skills Framework being seen as a
subsequent exercise, that not all trusts have completed.
Consequently, the Department re-launched the Knowledge and Skills
Framework in November 2007 and emphasised the need to use the
Framework again in May 2008.
- As a result we conclude that Agenda for Change cannot yet be
shown to have enhanced value for money. The Knowledge and Skills
Framework is key to realising many of the benefits from Agenda for
Change more widely, but has not been implemented by all trusts and
for all staff. The Knowledge and Skills Framework is only one part
of the picture; and the opportunities presented by Agenda for
Change need to be combined with clear leadership and management if
trusts are now to achieve the full potential of the programme.
There are, however, some examples of trusts using Agenda for Change
to work differently, and these provide models for others to
follow.
Recommendations
- The potential of the Knowledge and Skills Framework has not
been realised by many trusts, yet effective use of the Framework is
essential for maximising the benefits from Agenda for Change.
Trusts should have a champion at board level to make sure that all
staff have annual reviews; that managers have the training to use
the Knowledge and Skills Framework effectively; and staff have the
time to participate fully in reviews. The champion should work with
operational colleagues to exploit opportunities where effective use
of the tools within Agenda for Change and the Framework can
contribute to wider organisational and service improvements through
better, more productive ways of working.
- To motivate trusts to get more out of Agenda for Change the
Department should recommend that trusts specify, within business
cases for changes to the way services are delivered, how the
planned improvements to patient care and/or productivity will be
augmented by use of Agenda for Change, for example through the
creation of new roles or a change in the grade mix of staff around
a given patient pathway.
- The Department in turn should collate information from
individual trusts which shows how working differently under Agenda
for Change has contributed to the changes in productivity and
patient care, so that there is a picture nationally of how Agenda
for Change is delivering improvement.
Footnote 1: The Department’s evidence
to the Health Select Committee’s Enquiry "Public Expenditure on
Health and Personal Social Services 2008, Uncorrected Evidence"
HC28-i, November 2008. [Back to
text]