Background

1. Government has agreed a pay reform deal with consultants, which will now be implemented. NHS Employers has issued a pay circular on the reformed pay scales to be implemented as part of the deal. Staff are expected to be paid according to these reformed pay scales from May, with pay backdated to 1 March 2024. NHS Business Services Authority (NHS BSA) will confirm the pay date through Electronic Staff Record (ESR) releases, in the usual way.

2. This guidance advises how commissioner allocations will be recurrently adjusted in 2024/25 to fund the impact of the consultants pay reform deal, sets out the expected impact on the cost uplift factor (CUF) in the NHS Payment Scheme (NHSPS), and provides financial reporting instructions for NHS organisations.

3. The contractual entitlement to access an annual local clinical excellence award (LCEA) round will cease and, as set out in the offer document published by NHS Employers, funding that has been used for consolidated LCEAs since April 2018 will be redeployed into remuneration for the new consultant pay scales. Consolidated LCEAs awarded prior to reform in 2018 will be retained. In the Revenue finance and contracting guidance for 2024/25, we instructed NHS trusts and foundation trusts (‘trusts’) to hold in reserve (and not spend) any funding relating to LCEAs from 1 April 2024.

Backpay attributable to the 2023/24 financial year

4. Some of the backpay paid to consultant staff in May will relate to 2023/24; that is, for the period from 1 March 2024 to the end of the 2023/24 financial year. We have estimated the cost of the backpay relating to 2023/24 for trusts based on the NHS workforce statistics collection and data from ESR, and will make direct payments to trusts where appropriate to cover the impact of these costs. We have provided instructions to trusts on how the relevant income and expenditure should be accounted for in 2023/24 year-end reporting.

5. The 2024/25 pay funding in integrated care board (ICB) allocations (outlined in the following section) includes a small amount for ICBs to provide financial support where a non-NHS provider has non-recurrent costs in 2023/24 for March backpay. This should only be issued where non-NHS providers have incurred costs due to contractual obligations resulting from the implementation of the consultants pay reform deal and which have not already been funded through 2023/24 contractual arrangements.

Allocations

6. The following commissioner allocations will be recurrently adjusted to cover the cost impact of the change to the 2024/25 CUF from the consultants pay reform deal.

• ICB core programme including the Elective Recovery Fund (ERF) – covering both NHS and non-NHS services in scope of the NHSPS
• ICB delegated specialised services – covering NHS and non-NHS services in scope of the NHSPS
• ICB delegated other primary care (pharmacy, ophthalmic and dental) – delegated allocations will be uplifted to reflect the cost impact of the consultants pay reform deal for secondary dental services. The ICB dental ring-fences will also be updated accordingly
• Service Development Fund (SDF) – the SDF funding already notified to ICBs will be uplifted where appropriate to fund the impact on pay costs
• NHS England direct commissioning programme (including ERF) for specialised, public health, armed forces and health and justice services – covering NHS and non-NHS services in scope of the NHSPS.

7. The fair shares funding issued to commissioners in 2024/25 will take into account the recycling of funding for newer LCEAs (post April 2018), as well as the expiration of some older (pre April 2018) LCEAs. The remaining older (pre April 2018) LCEAs will expire in future years. Where there are differential cost impacts as a result of the consultants pay reform deal – for example, due to staff mix and LCEA arrangements – systems (the ICB and financially apportioned trusts) will need to locally manage these by agreeing how the allocated pay funding is distributed in intra-system contracts to manage local pay pressures.

8. The adjustments will be processed recurrently through 2024/25 in-year reporting and as baseline adjustments when generating 2025/26 allocations. The Mental Health Investment Standard will also be adjusted to reflect the additional funding.

9. The impact of additional pay relating to education and training income will be funded on top of the published education and training tariffs. We will work with the Department of Health and Social Care (DHSC) to formally implement this through an update to the education and training tariff following the confirmation of pay awards through the NHS Pay Review Body (PRB) and Review Body on Doctors’ and Dentists’ Remuneration (DDRB) processes. Further details will be communicated about this in due course.

10. Trusts should seek to agree arrangements with all non-NHS commissioners based on the appropriate funding for services, including the consultants pay reform deal. Funding will not be issued in 2024/25 to cover the impact of the consultants pay reform deal on public health services that are commissioned by local authorities, or to cover the impact on costs funded by research and development funding. Following the PRB/DDRB processes later this year, the DHSC will review the cost impact and provide further guidance if necessary.

11. Additional non-recurrent funding will be issued to ICBs in 2024/25 to contribute to the impact on NHS trust cost bases funded from non-NHS income sources, excluding the items discussed above. This funding will be issued to ICBs on a host provider basis (to the ICB where each NHS trust is financially apportioned) and is separately identified.

Payments and contracts

12. Where they have not done so already, commissioners and providers must make every effort to sign contracts for 2024/25 as soon as possible, based on the amended NHS Payment Scheme (NHSPS) for 2024/25 published on 27 March 2024. The net CUF in the amended 2024/25 NHSPS includes a nominal 2% headline pay uplift for all staff groups, which has been included in allocations and agreed with government while the PRB/DDRB processes for 2024/25 pay awards have not yet concluded.

13. We intend to issue an updated CUF after the conclusion of the PRB/DDRB processes for all staff groups, that includes the cost impact of the consultants pay reform deal and all 2024/25 pay awards. We will publish guidance following the announcement of the pay awards that includes the final updated CUF, and advises how commissioners and providers should action necessary amendments to contracts through an in-year contract variation process, including contracts operating on aligned payment and incentive (API) arrangements, NHSPS unit prices and local prices. Where contracts operate on local prices within the scope of the NHSPS, commissioners and providers should have regard to the final updated CUF when issued.

14. We expect to issue updated low volume activity (LVA) values when an updated CUF is issued following the announcement of 2024/25 pay awards. Where the impact of the updated CUF inflates any values to an amount above £500k, these will still be treated as an LVA arrangement and the ICB and provider will not need to agree contracts for 2024/25.

15. To support local understanding, we have calculated an interim indicative CUF to show the cost impact of the consultants pay reform deal when compared to the original CUF in the NHSPS published on 27 March 2024; see Table 1 below. Therefore, the interim indicative 0.9% net CUF in Table 1 below now includes the impact of both the consultants pay reform deal and the nominal 2% headline pay uplift for all staff groups (including consultants) already in the CUF published on 27 March 2024. ICBs and trusts should refer to the 0.3% change in the net CUF when updating their financial reporting (see following section).

Table 1: Interim indicative CUF

Financial reporting

16. ICBs and trusts will be permitted to re-profile their income and expenditure plans in-year to reflect the consultants pay reform deal in Month 2. There should be no deterioration from the agreed plan position and any distributional impacts should be managed locally.

17. For intra-system contract relationships, the trusts and ICB should agree the appropriate distribution of the consultants pay reform deal funding to the providers in the system on the basis of local understanding of consultant pay pressures. They should use this agreed distribution as the basis on which to account for the relevant income for trusts and expenditure for the ICB. For inter-system contracts, trusts and ICBs should account for the relevant income and expenditure on the basis of the interim indicative net CUF shown in the section above.

Cash management

18. The CUF in the current 2024/25 NHSPS includes a nominal 2% headline pay uplift for all staff groups, because final pay arrangements for 2024/25 have not yet been agreed. This means that trusts are currently adequately cash-funded for the cost impact of the consultants pay reform deal pending confirmation of 2024/25 pay awards (after which point, the CUF will then be updated to reflect all pay awards and the consultant pay reform deal).

19. However, where trusts have identified cash support requirements to manage the impact of the consultants pay reform deal between May and the point at which contracts are varied for the updated CUF, it is expected that host ICBs will support the cash requirements of trusts by processing a payment on account to trusts. When calculating any cash support requirements, trusts should consider the cash benefit from the changes to LCEAs introduced as part of the consultants pay reform deal in April 2024.

20. ICBs should continue to manage any additional cash support requirements via the ICB Cashflow Forecast (CFF1) submission for the following month. Any queries relating to cash support and CFF1 or CFF2 should be directed to nhsenglandcash.management@nhs.net.

Queries

21. Queries on this guidance should be directed to england.finplan@nhs.net.

Publication reference: PRN01331