London Economics’ analysis of Agenda for Change pay erosion

March 24, 2021

Following recent debate in relation to whether employees covered by the Agenda for Change (AfC) Framework have received a real terms pay cut since 2010-11, London Economics have produced a short analysis outlining the impact of inflation on the salaries received by AfC workers. Simply put, the analysis indicates that more than 1 million AfC workers have seen a real-terms pay reduction over the last decade.

Years of austerity mean that staff working across the NHS in England have suffered a real-terms pay cut over the last decade, our economic research shows.

London Economics carried out analysis of Agenda for Change (AfC) framework under which most NHS staff are paid. The analysis comes as MPs are set to debate NHS pay in Parliament on Wednesday following extensive criticism of the Government’s proposed 1% pay rise this year.

The AfC framework is made up of nine bands subdivided into specific pay grades or “spine-points”. The analysis found that in all 54 of those original pay grades, salaries fell in real-terms over the last decade when adjusted for inflation – by as much as 32% in one case.

Dr Gavan Conlon, a Partner at London Economics’ and one of the report’s authors said:

“Our analysis makes clear the impact that years of economic austerity have had on NHS pay.”

“Any suggestion that nursing staff’s salaries have increased in recent years is inaccurate – they haven’t.”

Salaries in none of the Agenda for Change pay spine-points increased over the last 10 years once inflation is factored in”.

“On paper, people’s salaries may have gone up in cash terms, but the reality is that their pay buys them less than it did a decade ago.”

Dr Conlon said that although NHS staff who had had moved up a pay grade may have a real-terms pay rise in that time, he added that:

“many NHS staff – around 40% – were ‘stuck’ at the top of their pay band irrespective of their performance or competence”. He said, “a really important issue in the AfC pay system is that it’s very hard to move between pay bands – unless a vacancy opens up. This means that many NHS staff see years of pay stagnation.”

“For those staff stuck at the top of their Band, there’s every chance they will have had a substantial real-terms pay cut over the last decade. For example, experienced nursing staff at the top of Band 5 may have seen their pay fall by 17% in real-terms during that time.”

Summary of the analysis

To arrive at the estimates, London Economics compared the average pay received by staff on each spine-point in 2010-11 and 2020-21 (including base salaries and any additional pay elements). For each spine-point, they considered the average pay per (full-time equivalent) staff in 2010-11, and calculated what this rate would have been in 2020-21 if AfC pay had risen with inflation (using Retail Price Index (RPI) inflation). They then compared this with the actual average pay per staff in 2020-21.

Further examples of the analysis

Below are two specific examples of how London Economics calculated the amount by which salaries in each pay band had fallen in real-terms over the period.

  • Staff at the bottom of Band 5 (Spine Point 16) were paid an average of £24,176 in 2010-11. If pay had increased with annual inflation since then, this would have increased to £31,750 by 2020-21. Instead, actual average pay on this spine-point stands at £28,223 in 2020-21. Comparing the last two numbers, this means that average pay on this spine-point has declined by 11% in real terms since 2010-11 [calculated as (£28,223 – £31,750)/£31,750].
  • Staff at the top of Band 5 (Spine Point 23) were paid an average of £32,438 in 2010-11. If pay had increased with annual inflation since then, this would have increased to £42,600 by 2020-21. Instead, actual average pay on this spine-point stands at £35,342 in 2020-21. Comparing the last two numbers, this means that average pay on this spine-point has declined by 17% in real terms since 2010-11 [calculated as (£35,342 – £42,600)/£32,438].
  • Example of calculations of changes in real pay between 2010-11 and 2020-21
Average pay per staff, £ Band 5,

Point 16

Band 5,

Point 23

Actual in 2010-11 £24,176 £32,438
Hypothetical in 2020-21 if pay had grown with inflation £31,750 £42,600
Actual in 2020-21 £28,223 £35,342
% difference actual vs. hypothetical in 2020-21 -11% -17%

Source: Source: London Economics’ analysis based on NHS Digital data and ONS Retail Price Index data

The full table showing the changes in each of the 54 original pay bands over the last decade has been published here and is also presented in the Figure below. Additional detail of this analysis is available at www.londoneconomics.co.uk.

 Additional notes to editors

The AfC system was introduced in 2004 to modernise the NHS pay system. It covers approximately 1.3 million NHS staff across the United Kingdom, and includes all occupations with the exception of doctors, dentists and senior leaders. The pay Bands range from Band 1 to Band 9 with a number of the pay grades merging in recent years (resulting in 28 pay grades).

In June 2018, employers and unions agreed a three-year deal for NHS staff in England. As part of a that deal, automatic progression from one pay grade (or “spine”) each year ceased. For example, in 2020/21, in Band 5, employees with one- or two-years’ experience earn £24,907; 2-4 years £26,970; 4-6 years £27,416; and 6 or more years £30,615.

Approximately 37.5% of NHS staff are at the top of their pay band.

Figure 1 – Change in real total pay per FTE staff on the AfC framework in England between 2010-11 and 2020-21 (compared to RPI), by AfC spine-point.

London Economics AfC pay – Press Release