National Health Service (NHS) productivity fell 2.5% a year during 2001-5 and the Service pay bill has risen, despite government efforts to make improvements in both areas, MPs have said.

Increased productivity and savings were expected to be delivered by Agenda for Change, the major programme for modernising and simplifying the pay and conditions of 1.1 million NHS staff which was implemented between December 2004 and December 2006. In its business case for the programme, the Department of Health had predicted to the Treasury that it would produce savings totalling £1.3 billion in its first five years, resulting from productivity improvements, fewer equal pay claims, reduced use of agency staff and more controllable costs.

However, not only did productivity actually decline to 2005 (albeit with a slight improvement since then), the NHS pay bill has risen 5.2% a year on average since 2004-5, according to a new report from the House of Commons Committee of Public Accounts. Moreover, the new and more effective ways of NHS staff working forecast to result from the Agenda have yet to emerge, the MPs add.

Agenda for Change covers the pay of all NHS staff in England except doctors, dentists and senior managers, and represented a bill of £28 billion in 2007-8. The Department had claimed that the new ways of working produced by the programme would contribute to improved patient care and to more efficient delivery of services. The Agenda also introduced a job evaluation scheme, harmonised employment terms and conditions and the Knowledge and Skills Framework - a key element aimed at encouraging staff development and improving performance.

But the Framework has been relaunched twice and, by autumn 2008, only 54% of all NHS staff had been given the required annual knowledge and skills review, the MPs found. In their report, they stress that full implementation of the Framework is crucial to bringing about improvements in patient care and efficiency, and call on all NHS Trusts to ensure that every member of staff has received an annual review by April 1, 2010.

The report is critical of the fact that Department did not actually require NHS Trusts to measure the benefits expected to be derived from the programme. “To motivate Trusts to deliver change, the Department needs to put in place a clear framework of indicators to allow for comparison of performance between Trusts,” it recommends.

“What evidence there is, derived from Office of National Statistics figures, suggests however that the productivity of the NHS fell by 2.5% a year on average between 2001 and 2005, although since then there has been a slight improvement,” said the Committee’s chairman, Edward Leigh, Conservative MP for Gainsborough. “The substantial growth in the amount of healthcare provided was outstripped by the even faster growth in NHS staffing and resources,” he added.

“It is not known whether the Agenda for Change programme has generated the predicted £1.3 billion savings. That makes it all the more incumbent on the Department to explain to us how the programme is going to support the £15 billion of efficiency improvements in the NHS planned for the next three years,” said Mr Leigh.