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Does the NHS pay staff too much?
OECD research suggest that British GPs get paid twice as much as French counterparts, relative to average national salaries

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Cath Everett
Guardian Professional, Wednesday 22 June 2011 09.00 BST
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Healthy incomes: the NHS pays GPs highly by international standards. Photograph: Mark Gabrenya/Getty Images/iStockphoto
There is a perception that NHS medical staff are paid significantly more than their colleagues overseas. As the health service in England struggles to cut £20bn from its annual budget over the next four years, and salaries often making up two thirds of the budget of some NHS trusts, levels of pay are an obvious - if politically fraught - area for examination.

Judging whether the workforce is paid too much, too little or about the right amount is tricky. According to Mark Pearson, head of the Organisation for Economic Co-operation and Development's (OECD) health division, the only realistic method of weighing up salary differences at the international level is to look at wages relative to average national income.

On that basis, he says, nurses in the UK are paid an average amount when compared to other OECD countries. Countries including the US, Australia and Luxembourg all pay their nursing personnel more.

UK specialist doctors are similarly paid an amount close to the OECD average, although in this case there are far fewer differences between countries. While a UK specialist doctor receives about 4.3 times the average national salary, a specialist in France gets around 4.4 times more and in Germany 4.1 times.

But GPs are another matter. Pearson indicates that, relative to average wages, the UK pays its general practitioners more highly than any other OECD country - and nearly twice as much as France.

This situation dates back to the introduction of new GP performance related contracts in April 2004 following two years of protracted negotiations with the government of the day. The deal, which saw the funding of GPs' practices increase by a third, was heavily criticised at the time for resulting in significant pay increases accompanied by cuts in traditional services such as out of hours care.

GPs argue that, as contractors to the NHS, they have to pay some costs out of their own pockets that are met by employers for staff. However, high levels of pay for GPs have previously come to light through BBC research of public sector salaries, which showed seven of the 10 best paid NHS staff were GPs. Two GPs earned £475,000, the highest salaries in the state sector outside the BBC.

But in the wake of the coalition government's proposed NHS reorganisation and the creation of GP commissioning bodies, further increases in remuneration could be on the cards if only to keep practitioners on side - despite the current two year pay freeze across the public sector.

A survey undertaken by doctor's union the British Medical Association indicated recently that as many as 14.3% (equivalent to 6,700) of the 46,700 GPs across the country planned to retire during the next two years. While most wanted to go because they were getting old, a significant number were unhappy with proposed changes to the health service.

In Britain, a traditional way of dealing with unhappiness over health reforms is to follow the advice of NHS founder, Nye Bevan. When asked how he intended to win over doctors who were opposed to the creation of the health service, he said that the answer was to 'stuff their mouths with gold'.

In the same vein, Pearson says: "I wouldn't be surprised to see some kind of incentive system put in place to compensate for the amount of time they have to spend on committees and the like. Politically, the government can't afford to have significant numbers of GPs retiring over the next three years."

But potential skills gaps in the shape of retiring GPs are not the only challenge that the NHS faces - and for which it may be forced to pay dearly, if not now, then certainly in the future.

Global skills shortages

The previous government said that the health service would need 108,000 new nurses and 62,000 new doctors by 2020 to cope with an ageing population. But the health service is already facing skills shortages among key professions such as midwives, community nurses, psychotherapists, sonographers and echocardiographers, and has been for some years now.

Moreover, a worldwide shortage of medical staff, which is estimated to amount to around half a million vacancies at any one time, means that the UK is facing significant competition from overseas to make up any shortfall.

Tom Hadley, head of policy and professional services at the Recruitment and Employment Confederation, says: "If you want to get top practitioners, you have to pay top dollar for it. It's a competitive market to get the right talent and certainly the feedback from our members is that having relatively high pay rates for doctors means you can bring in highly skilled professionals when you need them."

The coalition government's recent immigration cap on non-EU nationals is forcing trusts to look more to Europe than traditional sources such as Australia and South Africa for medical personnel of all types, and this is also starting to limit the potential labour pool - a situation that is likely to have an impact on wages over time.

"In practical terms, people are looking more at European markets such as Spain, Germany and Norway because they have surplus staff and that means it's important to have competitive pay structures in order to attract them," Hadley says.

But Andrei Shelton, managing director of jobs board Britishmedicaljobs.com, believes that there are already indications of potential trouble ahead in the nursing profession. He argues that pay freezes combined with low morale as a result of current uncertainty within the NHS are already encouraging personnel to leave in significant numbers.

While the health service may have taken on 8,500 nurses and midwives from countries such as Pakistan, India and the Philippines last year, the number of British staff leaving to work abroad hit a 10 year high of 5,500, compared with only 3,400 in 1997.

"The UK pays nurses a starting salary of £20,225 but it is $56,000 (£34,500) in the US so there's a big difference," he says. "If people are able to go to Australia, the US or Canada where the standard of living in cheaper, then they are."

To make matters worse, the Nursing and Midwifery Council expects the number of foreign recruits to outstrip the number of newly qualified nurses for the first time this year, despite the immigration cap.

What this all means is that into the medium- to long-term is that the NHS may simply have no choice but to rethink its remuneration strategy, at least in key professions, believes Shelton.

"The long-term implications are that salaries will have to rise in order to remain competitive. Once efficiency savings have been reached, the NHS is going to have to pay more to retain and attract staff," he concludes.