What is the government's pay offer to junior doctors and how much will it cost the NHS? A Q&A

What has been offered to junior doctors?

On 28 July 2024, the government announced a new offer for junior doctors, reported as a 22% average pay increase over two years. The BMA have recommended this offer to its members, who will be asked to vote on the deal.

What time period is covered by the government’s pay offer to junior doctors?

The government’s pay offer to the junior doctors covers two financial years: an increased offer for the financial year which ended March 2024 (which will be backdated to the start of the financial year, in April 2023) as well as an offer for this current financial year (2024/25).

How does this settlement compare to the NHS’s existing plans for junior doctor pay? 

Our analysis assumes that the NHS had already covered the cost of the original offer for the year that ended March 2024 (which averaged at around a 9% increase for junior doctors). The NHS will now need to find the additional 4.05% that has been offered for that year.

For the 2024/25 financial year, we assume the NHS was funded to afford a 2% increase in salary costs for all staff, and so will need to find the difference between 2% and the 6%, plus the £1,000 consolidated lump sum that has also been offered on top to all junior doctors for this year. Separately, the government has accepted that it should offer other NHS staff groups a pay settlement that is similarly higher than the 2% it has been funded for, and so it will also need to find a way to fund those increases, assuming they are accepted by trade unions.

The 22% overall increase for junior doctors is the compounded increase over the two years and includes the £1,000 that has been added on top as an additional consolidated raise.

What would these increased funding settlements cost the NHS?

We estimate that the total extra cost of the junior doctor settlement above what the NHS was funded for will be in the region of £600 million.

That includes employer pension contributions on the unfunded extra salary costs but does not include National Insurance contributions (as these are effectively circular because the income ultimately goes back to the Treasury). It also includes the cost of covering the salary increase for GP retainers – junior doctors working in primary care.

If we exclude the additional pension increase (as this would not be an immediate cash pressure on public finances), the total unfunded extra cost of the new offers (covering both 2023/24 and 2024/25) is in the region of £530 million.

How does the extra cost break down across the financial years?

£210 million of the estimated cost of £530 million relates to the extra backdated settlement for the financial year that ended in March 2023, and £320 million relates to the offer for this current financial year.

How will the costs affect the NHS’s annual accounts for 2023/24?

It is not yet clear how the 2023/24 pay deal will be reported in the accounts, but for context, NHS England’s board reports show that it ended the financial year 2023/24 with just a £30 million surplus, clearly not sufficient to cover the £210 million extra cost now added to that year’s pay bill.

How do the Nuffield Trust’s figures compare to the Chancellor’s comments on Times Radio that the cost of the pay settlement will cost £350 million?

We do not have the detail of the calculations behind these comments, but it is possible that this is the Treasury’s estimate of the 2024/25 cost, including higher pension contributions. Our own estimate for that would be within that ballpark.

What other factors might affect the overall cost of this pay offer?

There are some uncertainties around estimating the cost of pay offers because staff overtime rates are based on basic pay, but the quantity of overtime varies – particularly over the last year which has seen strike action.

The number of junior doctors has also increased since April 2023, to which the 2023/24 element of this total offer is backdated (with backdated pay being due to staff who were employed during the backdated period, although all will benefit from the future uplift to salary scales).

Furthermore, the accounts for 2023/24 have not yet been published, so our estimate is based on the 2022/23 accounts, which we have adjusted to take account of increased numbers of junior doctors in the year to March 2024, and the share of salary cost attributable to junior doctors. We do not make further adjustments to allow for increased junior doctor numbers since March 2024 as the trend is not certain.

Our estimated figures here do not include the knock-on costs that can be expected to be felt in the locum/agency staff bill, which the NHS is separately attempting to reduce, nor the impact on rates charged by private health care providers who undertake work for the NHS.

Commenting, Sally Gainsbury, Senior Policy Analyst at the Nuffield Trust, said:

“The government’s pay offer to junior doctors spans two financial years – the one which ended in March 2024, and the current financial year. Calculating the exact costs to the NHS is not straightforward as a range of things can affect exactly how much this would cost, including how much overtime doctors carry out and how many junior doctors there are. But our calculations suggest that the costs of this settlement will be in the region of £600 million extra over the two-year period, or £530 million if pension contributions are excluded.

“The additional costs to the NHS for the financial year that ended in March 2024 are likely to result in the health service reporting a deficit for that year. We don’t yet know the financial envelope for this current financial year, as the Chancellor will confirm that at the budget in October.”