Has the agency cap had any impact on agency spend?

There has been much debate about agency staff ‘bankrupting the NHS’ or ‘holding NHS trusts to ransom’, but how true is this? And has the introduction of the cap on the hourly rates payable to staff supplied through an agency had any impact on agency spend? Tahera Khan from DAC Beachcroft explains.
Monitor and the NHS Trust Development Authority (TDA) announced that from 1 February 2016 the amount of money that NHS trusts could pay per hour for agency staff would be reduced. 
·         In September 2015, NHS trusts were set individual expenditure caps for agency nursing staff.
·         In November 2015, caps on the hourly rates paid for all agency staff were introduced (set at 150 per cent above basic pay for junior doctors, 100 per cent for other medical and all other clinical staff, 55 per cent for non-clinical staff).
·         The caps on hourly rates were further reduced on 1 February 2016  (to 100 per cent for junior doctors and 75 per cent for other medical and all other clinical staff, remaining at 55 per cent for non-clinical staff). The caps fell again on 1 April 2016 to 55 per cent above basic pay for all agency staff.
·         There is a ‘get-out clause’ for NHS trusts which need to exceed the cap on ‘exceptional safety grounds’. These shifts must, however, be reported to Monitor and the Trust Development Authority on a weekly basis.
·         From 1 April 2016, allagency staff had to be procured through Monitor and Trust Development Authority-approved frameworks.
·         The caps on hourly pay rates will extend to ambulance trusts from 1 July 2016.
·         Compliance is a condition of access to the Sustainability and Transformation Fund.
Impact of the cuts
What have we established about the effects of the caps to date? Broadly speaking, the information points to only small successes in enforcing even the more ‘generous’ early caps.
Figures published in the Nursing Times state that 85 per cent of acute NHS Trusts that responded to their Freedom of Information request had exceeded the nursing cap since it was introduced. More than 20 NHS trusts had exceeded the cap for more than 100 shifts a week.
The UK's largest recruitment firm, Hays, has said that jobseekers are shying away from posts in the NHS after the cap has been introduced. Alistair Cox, chief executive of Hays, reported pre-tax profit up 7% to £82.4m in the second half of 2015, on the back of 8% like-for-like growth in fees to £396.9m.  Hays' fees in the United Kingdom had increased by a more modest 3% and Mr Cox said this was partly down to weakness in the public sector. “We saw a slowdown in the use of temp workers in public sector amid the caps that have been introduced on salaries for workers in the health service,” he stated.
Mr Cox specifically alluded to the drop in agency workers' pay as the primary reason for the drop in public sector job market, and said: “People are taking themselves out of the labour pool because the salary is not commensurate with unsociable hours they’re being asked to work."
The conclusion is that in the future there may be two scenarios: the optimistic view is that NHS trusts will be better able to operate in accordance with the measures as the job market adjusts to new, lower rates of pay for agencies and for their staff across the NHS. Alternatively, if the caps are not adhered to on a widespread basis and the majority of providers breach the caps because they cannot operate within them, the credibility of these measures and any future decisions to further tighten the rates may be called into question.
The major risk is of course that the cap fails to address the underlying issue of shortage of permanent staff. NHS Trusts have increasingly been forced to rely upon expensive temporary staff to fill vacancies because they simply cannot recruit sufficient permanent staff. Only time will tell whether that problem will be exacerbated by  the number of agency workers walking away from the less attractive NHS rates of employment or whether, as staff get used to the rates of pay, they will return to the NHS.
Tahera Khan
DAC Beachcroft LLP, Manchester


Movement to Work, a collaboration of UK employers that aims to tackle youth unemployment
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