23 January 2008

Cast your mind back to the post on the market forces factor in the NHS and my criticism of the simplicity of the grievance agenda in damning the funding of the NHS in Cornwall.

The Centre for Economic Performance (CEP) has published this month a report on NHS nursing pay, Can pay regulation kill performance? Panel data evidence on the effect of labour markets on hospital performance.

Pay in the private sector, outside the NHS, varies from area to area. Nurses’ pay, which is nationally fixed, has some regional differences but nurses’ pay in areas with high pay outside the NHS does not match that outside pay.

The CEP report says that hospitals in areas with higher outside pay have problems in the recruitment and retention of nurses and have worse hospital performance and productivity than hospitals in low-outside-pay areas.

Productivity is defined on page 61 of the report.

Disturbingly, on performance or quality the report suggests that hospitals in higher-pay areas have higher death rates for heart attack patients, that is the death rate for deaths in acute hospitals from heart attack within thirty days of emergency admission for patients of fifty five and over; and offers explanations linked in part to uncompetitive pay.

Cornwall is a low-pay area and so the problems identified in the report do not, or should not, apply here. Indeed, the somewhat dated maps in figure 5 on page 54 of the report show Cornwall as an area of low wages, low rate of use of agency nurses, and low rates of defined heart attack deaths.

The report is a powerful argument for effective regional differences in NHS pay to reflect outside wages: it explicitly says on page 39 that productivity will improve and lives will be saved if this is done. I have previously posted about arguments for meeting regional realities in the minimum wage.

In the light of this report and the arguments for the market forces factor, just saying Cornwall unfairly gets less than other areas in NHS funding is a simplistic approach which fails to recognise the need to provide a good NHS service everywhere whatever the local circumstances; and getting fair NHS funding between different areas is problematic.

It is folly to fail to recognise local outside influences on the public services in Britain. Sloganising about “fair funding for Cornwall” is an inadequate response to the problems and does nothing to encourage understanding of the funding of public services. The hard question that all the political parties and people in Cornwall must answer is, Do you accept that pay and funding in the NHS must recognise outside pay realities and must therefore vary from area to area – and that some areas should receive more than Cornwall, a low-pay area?