Pension bill is diagnosed as cause of huge NHS costs rise

Published on 01/12/2005 12:01

THE spiralling cost of staff pensions is fuelling a huge rise in the bill for health services in the Lothians.

NHS Lothian was last year forced to pump more than 30 million into meeting its commitment to employee pensions.

Figures revealed today show that the total cost of providing health services in the Lothians rose from around 990m in 2003/04 to more than 1.097 billion in 2004/05 - a rise of ten per cent.

Health chiefs said that part of the reason for the rising costs was down to the huge bill for meeting staff pensions. The statistics show that total staff costs for the health authority rose by more than 13 per cent last year to almost 450m - a rise of 53m

Of this, an extra 35m was spent on nursing and medical staffing costs, with most of the money needed to meet an increase in pension contributions. The spending figures, released by the statistics arm of the NHS, also show 120m was spent last year on non-medical employees but it is unclear how many of these people would be saving for a pension.

NHS Lothian finance director John Matheson said the major reason for the rise in staffing costs was to meet pension obligations. He said the health authority was forced to increase its contribution to the employee pension scheme from 5.5 per cent to 14 per cent last year.

A second reason for an increase in the pay bill between March 2004 and March 2005 was associated with the Agenda for Change pay deal. Mr Matheson said this accounted for 1.5 per cent of the rise for non-medical staff.

A further 3.2 per cent of the cost was related to inflation, he said.

Mr Matheson said NHS Lothian was providing patients with "excellent value for money" and added: "These are UK-wide agreements and they are associated with recruitment and retention."

A spokesman for NHS Lothian said: "The increase was from pension contributions and that covered all staff that were superannuated. The cost of that was approximately 30m and that was covered by the Scottish Executive."

However, questions were today being asked about whether patients were receiving value for money, with record amounts being spent on the NHS.

SNP health spokeswoman Shona Robison said: "Are these pay awards and pay deals nationally being met fully by the Executive? My information is that they are not and health boards are having to make cuts in services to fund them.

"Although I support Agenda for Change and the pay deals for staff, they must be fully funded by the Executive because it's patients that will suffer as frontline services are cut.

"I think there needs to be more honesty and clarity around this because of the increased pressures health boards are facing because of things like these pay deals."

But Mr Matheson added that NHS Lothian's books had balanced last year and 2.5m of savings had been made from cutting the cost of bureaucracy.

He said: "The overall position is that NHS Lothian achieved financial break even and there was a slight underspend in 2004/2005 which was carried over to this year."

UNION officials said they remained concerned that workers at the lower end of the pay scale were not receiving a fair deal from the health service.

Branch chairman of Unison for NHS Lothian, Tom Waterson, said: "More work needs to be done for the majority of health service staff. We are concerned that those working at the lower end of the pay scale are not being recompensed, which is why we are backing a series of equal pay claims across Scotland.

"We are also still waiting for the new pay system. We expected Agenda for Change to come into effect in October but we are still waiting for that to happen - realistically that won't be until October 2006."

The bill for prescriptions has also rocketed, as health experts shift the focus to treating more people in the community.

While GP prescriptions are only up by 2.2 per cent, prescriptions and equipment issued by nurses during the course of their work in the community has risen by a third to top 2m.

NHS Lothian medical director Charles Swainson said a focus on heart disease prevention by prescribing drugs such as statins accounted for some of the rise.

The cost of shifting care for older people into the community was also contributing to the rise.

Expenditure on drugs in Lothians hospitals has also risen by 14.9 per cent to 51.6m.

Dr Swainson added: "The NHS still offers excellent value for money. You only have to look to other countries, at how the services have improved here and the growing life expectancy of the population."

But with statistics last week showing that NHS Lothian had not yet met the target for seeing all out-patient specialisms or half the in-patient and day case categories, others questioned if patients were getting a good deal.

Tom Ponton, Lib Dem health spokesman at Edinburgh City Council, said: "If the costs have gone up that much, then you would expect services to have gone up by the same percentage.

"There doesn't seem to be evidence that the service is getting any better and one has always got to be mindful of that.

"I think the general public are looking for better service, looking for waiting times to come down, and the increases [in spending] to be reflected in these sort of things. If people don't see any differences in the service, then we are entitled to ask questions."

His views were echoed by Councillor Kate MacKenzie, the Conservative spokeswoman on the council for health issues. She said: "I don't believe patients are getting value for money. More and more money is being spent and it doesn't seem to be making any difference to patient care which is very worrying.

"I think the doctors and nurses do a great job under difficult circumstances but I think too much is spent on bureaucracy so the eye is off the ball of patient care.

"They [the health board] are looking at the targets rather than addressing the problems patients have and I do not believe that is the way we should be going."

A spokesman for the Scottish Executive said: "The main reason for the large increase in costs is due to a large increase in staffing costs. This reflects our investment in more staff and better pay - rewarding them fairly for what they do. Investment in pay modernisation is investment in improved ways of working and therefore improved patient care.

"Other possible reasons include a general increase in case complexity; as more complex cases are carried out the cost per case will rise, and a possible increase in intensity of treatments being carried out."

He added: "The introduction of a national tariff for hospital procedures will increase transparency in how the NHS is spending its money. It will also be used for boards to benchmark their performance against other boards.

"We are still in the process of working to develop a tariff for this purpose. We will publish the tariff for 2005-6 in due course."