Agenda for Change

Why AfC is unworkable...

It will grow into an inflationary, unaffordable mess, says Roy Lilley, health policy analyst

NHS money troubles appear to have claimed another top-management scalp. First, the boss, Sir Nigel Crisp, "departed" and now Andrew Foster, the NHS workforce director, is going too. He says his exit is nothing to do with a £70m overspend incurred by implementing AfC. But ask anyone running a successful business how they do it, and they will say, "Keep a grip on costs".

You can be customer lovey-dovey, staff touchy-feely and environmentally bright and shiny, but unless your costs are right, you'll go broke, sack people and close branches. It's the simple business rule.

In the motherhood-and-apple-pie world of the NHS, they've lost their grip on costs. Staff have been sacked and wards closed.There's no avoiding the simple business rule. And, fundamentally, pay policies are out of control.

Foster's AfC is an attempt to replace the arcane Whitley Council framework for pay, benefits and rewards, adopted by the NHS more than 50 years ago. To say that was labyrinthine would be to ignore its convolution.

But AfC has supplanted complexity with intricacy. There are now more than 300 national job profiles. Individual work is reviewed, compared and calibrated against 16 factors and eight bands. Almost 1 million staff have gone through this maze and had their work ordered and arranged on a pay "spine" agreed with trades unions, employers and Uncle Tom Cobley.

AfC has entrenched the power of NHS unions. Little wonder they were so keen to shake hands with the naive negotiators in Whitehall. Without national pay bargaining, unions have no raison-d'etre.

In next to no time, when work is redefined to match the demands of an ever-changing healthcare environment, when pharmaceutical solutions make more hands-on procedures redundant, when pay demands get more prescient, AfC will become inflationary, divisive, unwieldy and unworkable.

How do I know? Through bitter experience.

During the Thatcher health reforms, I chaired one of the first NHS trusts. We were pressed to use our new freedoms, one of them being to engage staff on local pay and conditions. It was tricky, as we remained limited by the national pay envelope - stranded in a no-man's land between complete freedom and the walls of Whitehall. Our bright idea was a groundbreaking pay spine, an early AfC lookalike. We evaluated, appraised and moved about 70% of staff away from Whitley rates.

Three years later, the scheme ground to a halt. My successors watched it grow into an inflationary, divisive, unwieldy, unworkable and unaffordable mess and, rightly, stopped it. AfC will go the same way. It is unworkable.

So, what is the answer? Trust boards should be completely liberated and free to set their own pay rates, with no national parameters. Who knows better about local labour market demands, local employment conditions and precisely which staff to reward for doing what? As long as salary levels are set in Whitehall, trusts cannot be expected to balance their books. Salaries are 70% of their costs.

Ministers make much of local decision-making and devolved responsibility. So do it. Stop telling hospitals how much to pay their staff, otherwise they'll never get a grip on costs.

Roy Lilley is an author and health policy analyst. He chaired the former Homewood NHS trust in Chertsey, Surrey, from 1991 to 1995

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