How will a new pay settlement for NHS staff affect real-terms earnings?

A new pay offer aiming to end NHS strikes in England has been accepted by a majority of the unions involved in talks, resulting in likely pay increases for NHS staff other than doctors. What does this settlement mean for NHS staff pay packets compared to salaries in 2010, and where does this leave discussions between government and the NHS workforce? Lucina Rolewicz, Billy Palmer and Mark Dayan update our ongoing chart analysis of staff pay.

Chart of the week

Published: 03/05/2023

After months of negotiations and strikes, the acceptance of the government’s pay offer by the majority of unions representing NHS staff other than doctors means we now have some clarity on how their pay packets will be affected. The pay deal agreed is very complicated, and includes a range of one-off and recurring pay increases – another sign that the traditional structure of a single pay settlement and review is under increased strain. However, we know enough to make a reasonable projection about whether this will change a longstanding picture of NHS salaries having fallen below inflation over the past decade.

In the chart below, we look at how the headline offer in this settlement would affect salaries for key staff groups, and what that means in real terms compared to the pay those groups received in 2010.

The effect of the new agreement is to considerably improve the real terms pay picture for 2022–23 (the financial year which ended in March), with a clear increase for three of the groups we look at and the removal of a sharp decline in inflation-adjusted pay for the average nurse, shown in blue. However, because the new money for 2022–23 is not counted to calculate future years’ increases, pay this year (2023–24) will only be around 10% higher than two years previously. This period has seen actual and projected CPI inflation of around 15%, so a sharp drop is visible in 2023–24.

The settlement will mean that total spending is higher than the government had initially budgeted for, requiring additional money from the Treasury or painful cuts elsewhere. But our calculations show that it does not represent in any group a ‘catch up’ for historical real-terms pay cuts.

The acceptance of this pay offer is very far from an end to discussions and disputes between the government and the NHS workforce. Pay is supposed to be set through an independent Pay Review Body, but this deal hammered out by ministers overrides that process yet again. We have argued that the entire process needs to be faster, fairer, and better attuned to what different staff groups need, and we have proposed an eleven-point plan for reform.

Beyond that, we know that pay is far from the only factor which puts people off from working in the NHS, or leads those working in it to leave. The settlement includes measures other than pay, but details remain scarce, and whether they will be sufficient is unclear.

With the Royal College of Nursing having rejected the pay offer and planning to ballot for further strikes, industrial action may not be at an end even for those groups covered by this settlement. Junior doctors remain in dispute over their 2% pay award last year – with the British Medical Association seeking a 35% pay increase instead. Consultants, too, will ballot in May over whether to walk out. Tensions over the attractiveness of the NHS as a place to work are likely to remain a major issue for many months to come.


Data notes

To adjust for purchasing power, this calculation uses CPI inflation figures published by the Office for National Statistics up to March 2023, and projections from the Office for Budget Responsibility for the current year, 2023–24. These are government financial years, and run from each April to the following March. To reflect staff being paid regularly, we use averages across the months or quarters in each year, rather than the figure at the end of the year.

The new pay offer includes two lump sums for the last year, 2022–23, on top of the previous pay increase for that year of £1,400 for most staff; and a 5% increase for most staff in this current year, 2023–24. For support staff, and some of the ambulance staff included in the group we used, the pay offer was more generous for those on lower bands. We have accounted for this by adjusting the increases so that they reflect the mix of staff on different bands as it was in March 2022.

The salary estimates for 2022–23 and projections for 2023–24 are sensitive to changes to the average seniority of staff within these staff groups with, for example, a disproportionate increase in the number of people at lower pay points over these two years likely to result in a lower average salary. Similarly, if inflation over 2023–24 differs from that predicted by the OBR then real-terms pay will be affected.

We have plotted the salaries based on when the pay deals theoretically cover, so that lump sums offered for the 2022–23 year are shown then. In practice, these were not agreed until the year was finished, so the higher pay will only be actually received now, backdated.

Suggested citation

Rolewicz L, Palmer W and Dayan M (2023) 'How will a new pay settlement for NHS staff affect real-terms earnings?'. Chart of the week, Nuffield Trust.