What are the consequences of recent caps on NHS agency staff spending?

phoebe-dunn-portraitFour months since the first caps on agency spending were introduced by NHS Improvement—and after new framework agreements came into force last week—what do we know about the impact of these measures so far?

Unfortunately, not a huge amount. Although NHS providers are submitting weekly data returns to NHS Improvement, no official figures have yet been published. Without this we are, to some extent, in the dark about the effects of the measures, instead relying on piecing together other sources of information—such as Freedom of Information requests and individual trust and agency experiences—to try and gauge early indications of impact.

Before we delve into what these sources indicate about progress, here’s a quick rundown of the measures:

• In September 2015, trusts were set individual expenditure ceilings for agency nursing staff.

• In November 2015, caps on the hourly rates paid for agency staff were introduced (set at 150% above basic pay for junior doctors, 100% for other medical and all other clinical staff, 55% for non-clinical staff).

• The caps on hourly rates were further tightened on 1 February (to 100% for junior doctors and 75% for other medical and all other clinical staff, remaining at 55% for non-clinical staff). The caps fell again on 1 April to 55% above basic pay for all agency staff.

• There is a “break glass” provision for trusts that need to override the caps on “exceptional safety grounds.” Shifts exceeding the caps are reported to NHS Improvement weekly.

• From 1 April 2016, all staff groups will be procured through NHS Improvement-approved frameworks.

• The caps on hourly pay rates will extend to ambulance trusts from 1 July.

• Compliance is a condition of access to the Sustainability and Transformation Fund.

So what do we know about the effects of the caps to date? On the whole, the information points to only patchy success in enforcing even the more “generous” early caps. A recent discussion with one agency suggests that it has largely managed to reduce its rates to below the cap for nurses in London (which benefits from the London weighting on pay), but that it has been more difficult in areas outside the capital, where in the majority of cases (particularly for highly specialised or critical care nurses) rates have been above the 75% cap.

In the case of allied health professionals, some areas are operating within the cap but a majority are not—again particularly outside London. For doctors the story is even more marked. Here the agency reports that they were not able to meet the first round of caps in the vast majority of instances, with wide variation between grades and specialties.

Figures published in the Nursing Times paint a similar picture: 85% of acute trusts that responded to their Freedom of Information request had exceeded the nursing cap since it was introduced. More than 20 trusts had gone over the cap for more than 100 shifts a week.

This intelligence may not tell us much about what will happen as the hourly pay limits continue to ratchet down and begin to bite. The real test has come now that all the price caps—for doctors and nurses alike—have dropped to 55 % above basic rate of pay (which happened from 1 April 2016). (This might not seem particularly low, but it includes all related costs: employer pension contributions and National Insurance, holiday pay, and an administrative fee. Effectively, the 55% cap means an agency worker “should not be rewarded more than an equivalent substantive worker,” which may not be enough to attract staff to work what is sometimes effectively overtime).

There may be two scenarios: the optimistic view is that trusts will increasingly be able to operate in line with the measures as they bed in and the market adjusts to new, lower rates of pay for agencies and for their staff. Alternatively, if for whatever reason the caps are not enforced on such a widespread basis and the majority of providers cannot live within them, the credibility of these measures and any future decisions to further tighten the rates may be called into question.

The major risk we see is that the solution being pursued by the national bodies fails to address the underlying issue of shortage of supply; in recent years providers have increasingly been forced to rely upon more expensive temporary staff to fill vacancies because they simply cannot recruit sufficient permanent staff.

This view is echoed in recent reports from the National Audit Office, the NHS Pay Review Body, and the Public Accounts Committee, which concluded that “the NHS will not solve the problem of reliance on agency staff until it solves its wider workforce planning issues.” The danger then, if more stringent caps are enforced and the shortage of permanent staff not tackled, is that providers will simply not be able to get the staff they need. This was a very real concern highlighted by finance directors in the February edition of our Quarterly Monitoring Report, where more than 20% thought that agency limits would affect their ability to recruit the staff they needed to provide safe care to patients. Controls on agency staff should be part of a wider workforce strategy that ensures the NHS can attract the staff it needs.

Read the King’s Fund report on workforce planning in the NHS

Phoebe Dunn is a research assistant in policy at the King’s Fund.

Competing interests: None declared.

This blog first appeared on the King’s Fund website here.

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