The Maynard Doctrine: Squeezing the public sector – progressive pain on pay

Professor Alan Maynard OBE offers some ‘black sky thinking’ about how the NHS could react to cope with recessionary economics.

It is time for NHS purchasers and providers to confess their failings and mitigate their inefficiencies. Unless they ‘bring out their dead’, their capacity to weather the storms of recession funding will be inadequate and they will join the redundant throngs produced by mischief of the bankers.

The Tories will delegate decision-making to some uncertain degree, in order to divert the protests and the pain onto local managers. An obvious target for such delegation is pay.

Progressive pain on pay
This time next year, the government may cut public sector pay on average by 10 per cent. As in Estonia, these cuts will be proportionately less for the low-paid and more for the better-paid. They will also be accompanied by redundancies - but these will have to be modest, if staffing is to be kept sufficient to meet ever-growing patient care requirements.

A crude guestimate of the savings of this would be about £7 billion, if labour costs are assumed to be 70% of expenditure and the NHS budget exceeds £100 billion. Mr Osborne, as Chancellor-In-Waiting of the Exchequer, would of course lose taxation revenue; say 30% of £7 billion or £2.1 billion.

These losses would be increased if there is a pay freeze and a prohibition of wage drift or moves up pay grades, which is likely.

Cremating the ‘pension to die for’
However, an attack on public sector pensions might generate some nice revenue flows and savings. Taxing public sector pensions would cause uproar, but in a “time of profound economic difficulty”, it may be tried.

The closing of public sector pension schemes could also have some nice expenditure gains for government

The neat game after such wages cuts would be that meeting funding growth pledges for the NHS would be easier. Essentially, the savings from the wage cuts could be directed into service provision as “new money”.

However service provision remains poor. PCTs have neither the incentives nor leverage to beat providers into improved efficiency. Consequently, their fate is uncertain.

In the short term, they will want to exploit Tory promises of downward flexibility in PbR tariffs. The Tories say these tariffs will be the maximum price and PCT negotiation should drive down local prices.

'Have PCTs the capacity and the nerve to be vigorous price-cutters after two decades of life as bank clerks who paid up without question?'

Have PCTs the capacity and the nerve to be vigorous price-cutters after two decades of life as bank clerks who paid up without question?

CQUINs for Strictly Come Economising
This flexibility will be augmented by vigorous use of CQUIN by PCTs. David Nicholson has indicated failure to hit CQUIN may cost hospitals up to 4 per cent in tariff cuts.

PCTs can manipulate the contents of CQUIN. For instance, they should refuse to fund any patient care which includes a ‘never’ event (e.g. patient infection, wrong site surgery, wrong drug/wrong dose, pressure sores and falls or trips). Again, PCTs will have to develop the capacity to develop CQUIN and check provider data returns to ensure they are not telling “porkies”!

Backbone found – interested PCTs should apply to Lost Property
Further action by PCTs is dependent on their acting together at the regional and national level to ensure the constraints imposed on them by Whitehall Village are loosened.

'Collectively, PCTs might declare that they will not automatically fund NICE “guidance”. Most of this material is for hideously expensive and marginally cost effective drugs.'

For instance: collectively, PCTs might declare that they will not automatically fund NICE “guidance”. Most of this material is for hideously expensive and marginally cost effective drugs. PCTs have better things, in terms of bang for the buck, to fund and should be free so to do.

Sadly, the national PCT voice is absent. PCTs need to get their act together and acquire real power to act as vigorous purchasers, rather than ciphers.

They might demand that the Department reforms clinical excellence awards and turn them into a consultants’ QOF - one related to clinicians’ productivity and compliance with local processes and protocols. (The Good Lord Darzi failed to do this, sadly. A golden opportunity missed again!)

They might likewise demand that the Department freezes all GP appointments and enables PCTs to substitute nurses for GPs. A GP-population ration of 1 : 5,000 would facilitate the removal of at least half the GP stock over time. Research evidence shows that nurse practitioners can do most GP tasks; that the patients like them more; and that they are cheaper.

Too radical? With the size of the hole in the funding of the NHS growing with each guestimate, radical is the name of the game.

Will the Conservatives have the steel to be radical? If they don’t, the NHS may disintegrate.