Item 8.1 For 4 Apr 2014 High Cost Area Supplement For NHSG

NHS GRAMPIAN Board Meeting 04 04 14 High Cost Area Supplement for NHS Grampian Open Session Item 8.1

1. Actions Recommended

The Board is asked to: 1. Note the requirements on the Board in relation to High Cost Area Supplement; and 2. Debate this paper and its options, along with the associated risks and make a decision on how this issue should be addressed.

2. Strategic Context

The NHS is undergoing a period of significant and rapid change and is constantly in the spotlight. The recruitment and retention of appropriate staff remains a huge challenge, particularly for NHS Grampian as we endeavour to meet key targets and deliver our modernisation agenda, whilst taking cognisance of the lessons learnt from the Mid Staffordshire experience and subsequent investigations. NHS Grampian needs to ensure the efficient recruitment and retention of quality staff, who not only exhibit the key skills and experience to undertake their job roles effectively but also demonstrate the right values, attitudes and behaviours to deliver compassionate care to our patients. Additionally and, following a period of reduced recruitment, NHS Grampian needs to improve how it retains, manages and develops its existing staff to ensure that its workforce continues to provide safe and effective service delivery. If this cannot be achieved there is a significant risk that service delivery may fail.

NHS Grampian has difficulties in both recruiting and retaining staff due to the vibrant economy in Aberdeen. Grampian workers have a lower disposable income than staff on the same pay grades in neighbouring areas and this is primarily attributable to the high cost of living in the Aberdeen which has been created by the oil industry.

3. Key matters relevant to recommendation

The purpose of this paper is to consider whether there is a justification for either a High Cost Area Supplement or another similar scheme to be introduced in the Grampian Health Board area. This issue has been debated at the NHS Grampian Remuneration Committee over the last few meetings and it was agreed that this paper should be presented at the April 2014 NHS Grampian Board meeting.

Impact on Services

A shortage of candidates with the right skills, abilities and experience in some NHS professions puts service delivery at risk and creates a highly competitive market. This is exacerbated for NHS Grampian because of our geographical location and the buoyant local economy in which we operate. There is a significant risk to NHS Grampian and the services it provides if it is unable to attract, recruit and retain a high calibre and skilled workforce. This is particularly so in areas which are hard to recruit to e.g. Doctors/Locums – there is current evidence that this is particularly so

1 in clinical and medical oncology, emergency medicine, psychiatry, paediatrics, radiology especially interventional radiology, and a number of medical sub- specialities including renal medicine, gastroenterology, geriatric medicine and acute medicine. General Practice is also an area where recruitment is a challenge for both the salaried service and independent contractors. Other areas where difficulty is currently being experienced are Midwives, Health Visitors/Children's Universal Services, Band 5 Nurses and some posts in Accident and Emergency, ITU and Theatres. For this reason it is imperative that NHS Grampian put mitigating measures in place.

Living in Aberdeen

The cost of moving to Aberdeen and cost of living here is becoming more of a recruitment issue for NHS Grampian. The cost of housing in Aberdeen is often mentioned by junior doctors, nurses, consultant staff and others, as a disincentive to moving here. In the past the NHS used to offer an excess rent allowance, which has been removed by changes to terms and conditions. This was based on a calculation of the costs of housing in Aberdeen relative to the place of origin of an appointee. It was paid in full for five years and then phased out over the next four years.

There is pressure from staff across Grampian, including our partnership colleagues, to seek authorisation for an Aberdeen Weighting, or an allowance such as described above, or even ‘golden Hello’s’. We have collected some evidence but we are aware that through the national frameworks established in Scotland to ensure equality that we are unlikely to succeed. There is little understanding in other parts of the country of the extent of the economic bubble that exists linked to the vibrant economy in Aberdeen.

In a recent exit interview with one young consultant, the Director of Workforce was told: ‘the reality is that when I was a trainee in Glasgow, I could buy more for my money than when I became a consultant in Aberdeen.’ The evidence supports this view as both salaries and house prices are significantly higher in Aberdeen than other comparable areas in Scotland, see Appendix 1.

NHS Grampian has evidence that preferred candidates subsequently decline offers due to this issue. In January 2014, NHS Grampian had 186 or 32% of the 574 NHS Scotland vacancies being advertised. Neighbouring Boards NHS Tayside and NHS Highland had 31 and 29 vacancies respectively while NHS Scotland largest Board – NHS Greater Glasgow and Clyde with a workforce around 2.5 the size of NHS Grampian had 112 vacancies. Between April 2013 and January 2014 NHS Grampian dealt with 31 791 applications, a 24 % increase on the same period in the previous year.

The Grampian region continues to experience a much lower incidence of long term unemployment and a lower proportion of under 25 year old claimants than the UK overall. Unemployment in March 2013 stood at 2.0% in Aberdeen City and 1.2% in Aberdeenshire compared to the national unemployment rate of 4.1%. Aberdeenshire currently has the lowest unemployment rate of all the 32 local authority areas in Scotland and Aberdeen City is the fourth lowest. The wider unemployment rate (including the economically inactive) is 8.1% nationally and 4.4% in Aberdeen City and 2.5% in Aberdeenshire.

2 Recruitment and retention issues have been highlighted for several years by NHS Grampian and the main reason for these is due to the buoyant micro economy in the Grampian region due to the oil industry. Recruitment challenges have been clear since the oil industry came to Aberdeen in the 1970s, the main issue is that public sector workers are attracted to go and work for much higher salaries in the oil industry and more recently it has been noted that often such staff in the region leave to go other service areas such as retail who are now paying higher salaries to attract staff. This is often after the Board has invested in fully training them.

Low unemployment in the Grampian region is causing significant issues with regard to NHS Grampian being able to recruit and retain staff. When unemployment levels are too low in an area, the knock on effect is that employers struggle to recruit the skills that they require and private sector companies will pay the “going rate” which means that they will attract the staff. In Aberdeen as supply of staff is severely restricted this will continue to push up the average salary, rental costs, property costs and public transport cost making it much more difficult for public sector employers to compete within the constraints of a national pay system.

Scotland is rightly proud of the economic powerhouse centred on Aberdeen but this needs to be supported by a world class health service and for the reasons above, this could be at risk.

Terms and Conditions

The Agenda for Change Terms and Conditions handbook paragraph 4.9 states: “It will be open to NHS employers or staff organisations in a specified geographic area to propose... (in the case of areas where no supplement exists) to introduce a supplement.” The NHS Staff Council, 2011.

The Terms and Conditions paragraph then says: “But this can only be implemented where:

 there is evidence that costs for the majority of staff living in the travel to work area covered by the proposed new or higher supplement are greater than for the majority of staff living in the travel to work area of neighbouring employers and that this is reflected in comparative recruitment problems;  there is agreement amongst all the NHS employers in that area;  there is agreement with staff organisations.”

From 1 April 2013 Area High Cost Supplements are paid only in London and as follows:

Inner 20% of basic salary, subject to minimum payment of £4 076 and a London maximum payment of £6 279 Outer 15% of basic salary, subject to a: minimum payment of £3 448 and London a maximum payment of £4 395 Fringe 5% of basic salary, subject to a minimum payment of £942 and a maximum payment of £1 632

Other Employers in the Area 3 Scottish Prison Service Reportedly acknowledge the difficulties and currently pay their staff a cost of living/location allowance on the grounds of the higher cost of living in the Grampian region. It is thought that they do this by increasing starting salaries for staff in Aberdeen but confirmation of this is awaited.

Aberdeenshire Council Although Aberdeenshire have spoken of this on many occasions they have never actually done it. However, they have used liberal interpretation of their temporary living allowance, i.e. for prolonged periods or for fixed term contracts to address the issue and have also recently adopted a employee referral scheme, where those that recommend a friend for a job, and that friend is recruited successfully, receive a retail voucher.

Aberdeen City Council Introduced Recruitment and Retention Incentive Payments for Teachers within the last year. The amount payable under the scheme was £5000 with £3000 paid on commencement of post and the further £2000 paid after the completion of three years satisfactory service. Teachers leaving the service in the first three years will be liable to repay the allowance. Reports are that the scheme was successful and they are looking to extend to other occupations. On 18 March 2014, Valerie Watts, the Council Chief Executive, wrote to John Sweeney, Cabinet Secretary to request for the Scottish Government to give consideration to funding for an Aberdeen weighting.

Scottish Ambulance Service and NHS24 Acknowledge having difficulties recruiting to lower banded posts within Aberdeen but have no plans to introduce a supplement. They have requested to be kept informed of NHS Grampian’s decision.

Private Sector Certas Energy have awarded their Aberdeen area employees with what is now known as the 'Aberdeen Allowance'. This is an annual total of £1560.00 paid monthly in addition to the normal salaries. PWC have also introduced a similar payment.

Options

There are a number of options which should therefore be considered:

1. Payment of a High Cost Area Supplement for all NHS Grampian Staff. Inner and outer London allowances are not appropriate as the cost of living there is higher than in Grampian but it may be appropriate to compare ourselves with the fringe allowance, a 5% increase in basic pay for all staff. This would cost approximately £21 million. This is clearly not affordable in our current financial situation. NHS Grampian is just about to submit our updated 5 year financial plan to the Scottish Government as part of the Local Delivery Planning process and it includes no allowance at the moment for any costs relating to an Aberdeen Weighting of any sort. Also bearing in mind that NHS Grampian’s turnover rate is approximately 10%, it could be argued that there can be no logic in paying a supplement to the 90% of our staff who are not likely to leave us, despite the fact that Staff Governance Standards give staff the right to be treated equally. 4 2. Payment for a limited number of staff adversely affected by the high cost of living in the area. A 5% increase in basic pay for staff on band 4 and below would cost approximately £4.6 million. To differentiate between staff groups could create employee relations issues for the Board. Consultant medical staff and other more highly paid groups have also identified this as a recruitment issue. Again this would not meet the Staff Governance Standard of treating all staff fairly and consistently.

3. As the high cost is limited to the Aberdeen area the payment could be paid to staff working in the City and Shire areas only. A 5% increase in basic pay for all staff, except Moray, would cost approximately £19.4 million. Again this is not affordable and singling out specific geographic areas for the payment is likely to cause unrest across NHS Grampian and would not meet the Staff Governance Standard of treating all staff fairly and consistently. It should be noted, however, that the issues in Moray are different and less related to the cost of living.

4. Agenda for Change Terms and Conditions have Recruitment and Retention Premia which could be pursued for specific ‘hard to fill’ posts. A stringent gathering of evidence around the recruitment difficulties for each post needs to be included in the business case which has to be agreed at NHS Scotland level. Health Visitors, for example, are a large group where this might be applicable. This possibility is not identified in current financial plans. Also the premia is not applicable to other non Agenda for Change staff groups e.g. Medical Staff and Senior Managers.

5. A local agreement could be reached to place new staff on a starting salary higher up their pay scale to compensate for the high cost of living. This may have to be agreed at national level through a variation order at STAC. NHS Grampian would have to decide whether this was applicable for all new staff or just those in hard to fill posts. A definition of what constitutes a ‘hard to fill’ post would have to be agreed, for example possibly only occupations on the Borders Agency list for doctors, or alternatively, to take into account local conditions, posts which have been advertised three times and not filled could be covered by this proposal.

6. Under the GMS Statement of Financial Entitlements 2013/14 a lump sum “golden hello” payment of £5000 can be made to doctors who are starting out as GP performers in their first eligible post. Consideration could be given to rolling this out to other ‘hard to fill’ posts although a definition of what constitutes a ‘hard to fill’ post would have to be agreed as above.

7. NHS Grampian should consider further investment in recruitment and relocation initiatives as part of our Recruitment 2020 Strategy.

4. Risk Mitigation

The major risk to NHS Grampian is that failure to recruit and retain the appropriate level of staffing will produce a negative impact on our ability to deliver the services required by the community. It is therefore imperative that we find a way to address this major workforce challenge. 5 If the decision is made to take the High Cost Area Supplement work further there are a number of associated risks which must be addressed:

 Agenda for Change Terms and Conditions state that there must be agreement amongst all the NHS employers in the area. This would mean NHS24 and Scottish Ambulance Service would need to be in agreement.  Agreement would need to be sought at National level and experience through our recent RRP proposal for craftsmen, has shown us that there is little understanding in other parts of the country of the extent of the economic bubble that exists due to the vibrant economy in Aberdeen.  Any agreement would have to be resourced from existing NHS Grampian finances which severely limits what can be considered.

5. Responsible Executive Director and contact for further information

If you require any further information in advance of the Board meeting please contact:

Responsible Executive Director Contact for further information Dr Annie K Ingram Clare Ruxton Director of Workforce Deputy Director of Workforce [email protected] [email protected]

25 March 2014

6 Appendix 1

Household Income by Local Authority

£0 - £10,001- £20,001- £30,001- Over £10,000 £20,000 £30,000 £40,000 £40,000 Aberdeen City 17% 32% 18% 13% 19% Aberdeenshire 14% 27% 20% 16% 22% Dundee 23% 39% 19% 11% 9% Edinburgh 18% 33% 21% 13% 16% Glasgow 24% 39% 18% 11% 8% Scotland 18% 34% 20% 14% 14% Scottish Household Survey June 2013

Average House Prices

Area December November December Annual 12 13 13 Change Aberdeen City 186 917 195 680 195 437 +4.6%

Aberdeenshire 195 652 209 601 207 315 +6.0%

Moray 133 234 132 783 133 190 0.0

171 934 179 354 178 647 - Grampian Board Area Average

Excluding Moray 191 284 202 640 201 376 -

Highland Board Area Average 147 490 147 317 149 397 1.3%

Angus 138 318 134 773 139 607 +0.9%

Dundee City 123 346 123 476 123 779 +0.4%

Tayside Board Area Average 130 832 129 124 131 693 -

All Scotland 154,197 158,590 160,270 3.9%

LSL/Acadata Scotland House Price Index January 2014

January 2014 Average house price in England and Wales 255 422 Average house price in England and Wales outside London 189 889 LSL/Acadata Scotland House Price Index January 2014

7 Scotland’s Seven Cities – Average House Prices January 2014

Aberdeen City 206 860 Dundee 131 351 Edinburgh 230 977 Glasgow 127 817 Inverness 157 797 Perth 191 286 Stirling 189 059

LSL/Acadata Scotland House Price Index January 2014 Comparative Rental Prices for 1-4 Roomed Properties

AREA 1 Bed Flat 2 Bed 3 Bed 4 Bed Rental House House House Rental Rental Rental Aberdeen City £558 £805 £1 080 £1,664 Aberdeenshire £558 £805 £1 080 £1,664 Moray £400 £475 £500 £695 Grampian Board Area £505 £695 £866 £1,341 Average

Highland Board Area £245 £350 £450 £867 Average Angus £300 £450 £490 £700 Dundee City £300 £450 £490 £700 Tayside Board Area £300 £450 £490 £700 Average Figures received from findaproperty.com

Salary Comparison Estimations

The basic salary for a Band 1 employee in NHS Scotland is £14 294, £7.29 per hour. The approximate difference in available take home pay for a full time band 1, superannuated worker in each of the three local Board areas, based on an employee living on their own in a one bedroom rented flat at council tax band A is shown below:

Band 1 Employee (Full-Time) Grampian Tayside Highland Take Home Pay £943.00 £943.00 £943.00 Rent £505.00 £300.00 £245.00 Council Tax Band A (25% discount for £67.66 £61.06 £64.85 single occupancy) Bus-Pass for month £52.16 £38.00 £34.00 Money left to live on per month £318.18 £543.94 £599.15

The costs indicate that staff in the NHS Grampian Board area are over two hundred pounds per month worse off than colleagues in neighbouring Boards.

8 A High Cost Area Supplement of 15%, the same as that paid to Outer London, would mean a minimum payment of £3 261.00 and a maximum payment of £4 156.00 per year. The difference this would make can be seen on the chart below:

Band 1 Employee (Full-Time) Grampia Tayside Highland n with 15% HCAS Take Home Pay £1,124.0 £943.00 £943.00 1 Rent £505.00 £300.00 £245.00 Council Tax Band A (25% discount for single £67.66 £61.06 £64.85 occupancy) Bus-Pass for month £52.16 £38.00 £34.00 Money left to live on per month £499.19 £543.94 £599.15

Even with this 15% High Cost Supplement NHS Grampian staff would still have less available income than staff in neighbouring Boards, but it would be much closer to the levels of disposable income of neighbouring Boards.