Is an NHS pay rise affordable?

UniteLive investigates - and the answer may surprise you

Reading time: 6 min

As Unite paramedics join thousands more health staff on strike on Wednesday (December 21), no one can deny that NHS staff have long deserved a decent pay rise.

Their real-terms pay, after all, has fallen off a cliff edge under successive Conservative governments over the last 12 years – since 2010, the TUC estimates that paramedics’ real-terms pay is down by an astonishing £5,600 on average. And this year alone, amid skyrocketing inflation, paramedics are £1500 worse off than they were last year.

That NHS staff risked their lives during the Covid pandemic – with many having died or suffered irreparably after having contracted the virus – only adds to the justness of their cause.

But the question on many people’s minds is – is a decent pay rise for health workers actually affordable?

If you only listened to the government, you’d be forgiven for thinking that any sizeable pay rise that even begins to address skyrocketing inflation would all but bankrupt the Exchequer.

But what do the actual figures show?

An authoritative analysis from London Economics paints a starkly different picture – not only is a decent NHS pay rise affordable, it would actually benefit the wider economy.

The consultancy firm analysed how much it would cost the taxpayer to give all Agenda for Change (AfC) NHS staff in England – which represents more than one million workers – an illustrative 10 per cent pay rise.

The headline figure for such a pay rise is calculated to be £3.4bn. That’s a significant sum, you might think. But not so fast, London Economics points out: 

  • Nearly half of that cost — £1.6bn – would be instantly recouped by additional tax receipts from staff and their employers, including from PAYE taxation, employee National Insurance and employer National Insurance.
  • A further £0.89bn would be offset by what London Economics called the “wider direct, indirect, and induced tax receipts” generated from NHS workers spending more throughout the economy.
  • And yet another £0.26bn could be knocked off the total bill after cost savings from the improved recruitment and retention of NHS nurses and midwives, as well as cost savings from lower student loan write-offs for nursing students.

What we’re now left with after looking at an  illustrative 10 per cent pay rise for all Agenda for Change NHS staff in England is a mere £0.66bn. To put this figure into context, London Economics says this amounts to just 0.075 per cent of total government expenditure in 2019-20.

That’s an infinitesimally small 7 and half pence out of every £100 the government spends on its entire budget.

To put this £0.66bn further into context – what is just over half a billion worth to the government? If such a comparatively small sum meant anything to this government, then it would not have:

These examples of government waste are just the tip of the iceberg and demonstrate that refusing to give NHS staff a decent pay rise is a political choice.

And it’s a choice that increasingly makes very little economic sense.

The bill for agency staff in the NHS, which is being fueled by permanent staff shortages, continues to climb to record-breaking levels. Research conducted by Labour found that in 2021-22, NHS trusts spent £3bn on agency staff alone.

An additional £6bn was spent on ‘bank staff’, which are NHS workers paid to fill temporary shifts, again because of the acute lack of staff, who’ve left the NHS in droves after over a decade of pay erosion.

While the government willfully refuses to budge on NHS pay, the London Economics analysis highlights another key benefit of giving health workers a decent pay rise.

“Pay increases for nurses, midwives, allied health professionals and NHS support staff are long overdue, and will result in increased disposable income circulating throughout the economy,” the consultancy firm noted in its research.

“Pay increases to approximately 1.1 million public sector employees across the entire United Kingdom will not only address the real erosion of pay and living standards amongst these vital public sector employees, but also provide huge financial support to those businesses and private sector employees in every sector of the economy that the government is currently supporting and most wants to succeed.”

In this sense, the key question is no longer, ‘Can we afford to give NHS workers a pay rise?,’ but rather ‘Can we afford NOT to?’

Commenting ahead of Wednesday’s NHS strike, Unite general secretary Sharon Graham urged the government to see sense.

“Ministers need to give themselves a shake and get into serious pay talks or see this strike spread,” she said. “Anyone with a passing knowledge of the NHS can see that this government has brought it to its knees. A decade of pay cuts and a chronic staffing shortage is crushing our NHS and putting patients’ lives at risk. Our NHS members feel that they are fighting to save the very NHS itself.”

“Unless the government shapes up, this strike will deepen and the blame for this will lie firmly at ministers’ door.”

By Hajera Blagg