The economic influence of the NHS at the local level

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Social determinants are a far larger factor in someone’s health than the quality and amount of health care they receive. An individual’s employment status, wellbeing, living conditions and income all have a greater impact on their health than the accessibility and quality of care provided by health services. As the biggest employer in England and a significant economic force in local communities, the NHS has a unique opportunity to use its resources to influence the wellbeing of the population it serves and reduce the health inequalities that exist in England.

Introduction

Last year the Health Foundation published a report on how the NHS could embrace some of these opportunities by acting as an anchor institution. Currently, there is no internationally agreed definition of an anchor institution, but the Health Foundation defined such institutions as ‘large, public sector organisations that are unlikely to relocate and have a significant stake in a geographical area… they have sizable assets that can be used to support local community wealth building and development through procurement and spending power, workforce and training and buildings and land’.

Health care organisations in other countries are exploring this idea, for example, the Montefiore system in New York and Canterbury in New Zealand. In some areas of England, including Preston, Leeds, Birmingham and Greater Manchester, the NHS is exploring ways of using its influence as a large employer to change the economic status of local populations. But this approach is currently the exception rather than the norm, although the long- term plan does make a specific commitment to explore how the NHS can take on this role more often in the future.

We hope that this long read will help people working in the NHS to understand the level of economic influence their organisations can have and the benefits this can bring to local populations, in a way they may not have considered before.

Methodology

We have brought data on economic activity within the wider economy together with data on employment and wages in the NHS at sustainability and transformation partnership (STP) area, as this geography most closely reflects the population level most relevant to the role of the anchor institution (pending the full establishment of integrated care systems (ICSs)). A fuller explanation of the methodology is provided below.

For this analysis, we have used data from a number of sources and adjusted the data across several different geographies. To be able to undertake analysis by local area, we needed to determine which localities trusts operate in and influence. Ideally, we would have matched the travel-to-work areas of staff in each trust to data on the rest of the economy to accurately measure the economic effect of NHS employment in each trust’s sphere of influence. Unfortunately, this data is not available, so we have undertaken a simpler, but less accurate, analysis. We have used the postcode of each trust headquarters to locate each NHS provider organisation in Office for National Statistics (ONS) geography at a postcode level. This allows us to match each trust to any higher level of geography.

We sourced most of our wider economy data from ONS, including data on the number of people employed and population size. We obtained data on median total earnings for the wider economy at local authority level from the Annual Survey for Hours and Earnings. The data on NHS staffing levels and total earnings came from NHS Digital, who we would like to thank for providing data on median staff earnings by trust for this project.

As mentioned previously, we wanted to try to capture the sphere of influence each trust has an employer, but lack of data on where staff live (as opposed to work) meant we were unable to estimate the local economic impact of trusts with complete accuracy. Not all NHS staff work in the local authority area in which their trust headquarters is located. This is particularly the case for trusts in urban areas or on the boundaries of a local authority, and for trusts who deliver services across a wide geographical area – such as providers of community services. So, to create a fairer estimate of how earnings in the NHS reach other parts of the economy, we chose to consider a larger geographic region.

We have used population weighted averages at STP level for each of the statistics published at a lower level of geography: currently, STPs are where the NHS and local organisations in other sectors come together to create population-level health systems, so this is the level most relevant to the role of an anchor organisation.

This long read looks at the NHS’s role within the wider economy from several perspectives – the level of influence the NHS holds through employment and spending; the relative level of earnings in the NHS compared to the wider local economy; and the provision of training, skills and opportunity.

What proportion of local employment is with NHS providers?

It’s important to understand the context in which the NHS, as an employer, sits. We don’t have data on employment by organisation in each local area, but we can use data in the Labour Force Survey (LFS) to provide comparisons across industries. In most regions in England, the two biggest industries are retail and wholesale trade, and health and social care provision (including private sector). Across England as a whole, health and social care provides 12 per cent of all employment (the LFS includes all health and social care roles, not just the NHS provider trust roles included in our analysis). The only other industry to account for more than 10 per cent of employment nationally is the retail sector.

The NHS is the largest employer in England, but the proportion of the local market occupied by NHS provider organisations varies across STPs (see Figure 1).


In some areas, NHS providers make up a relatively small percentage of total employment, especially in south-east England, where, in areas like Bedfordshire, Luton and Milton Keynes, and Mid and South Essex, the NHS employs slightly more than 2 per cent of all people employed locally. In contrast, in areas like Birmingham and Solihull, and in Nottingham and Nottinghamshire close to 7 per cent of all people in employment work within NHS provider organisations.

Although much of the past 10 years has been marked by the implementation of pay restraint, the NHS can offer opportunities and economic security for its staff, especially in areas where there has been a reduction in economic opportunity. The NHS offers reliable, stable employment: it is not going to withdraw from an area at scale, even if local services are realigned, making it uniquely positioned to provide economic opportunity at a time when the employment rate has never been higher and more uncertain in nature.

The NHS’s connection to its local economy

We should also consider the indirect impact the NHS can have on connected local businesses. By buying from local suppliers, and being a responsible partner, NHS organisations can help others provide economic opportunity to local people. As part of the Health Foundation’s report, the Centre for Local Economic Strategies calculated that nearly 70 per cent of Leeds Teaching Hospitals Trust’s spending on procured goods and services went to companies operating outside the wider local area. There may be opportunities for some of this spending to be redirected locally – for example, organisations in Preston have been working on restructuring their spending with a focus on local suppliers and have since moved from spending £37.5 million locally in 2012 to £135 million in 2017, creating 1,700 jobs.

The creation of local enterprise partnerships and local industrial strategies across England is, as NHS Confederation has pointed out, a significant opportunity for NHS organisations to become more involved with the economic development of their local region. There is no ideal level of local investment and investing all money locally is unrealistic and undesirable (as increased costs for suppliers could raise prices if required to work locally instead of at scale). Instead, given the link between employment and health outcomes, ICSs and STPs could think about how NHS organisations in their area can sustainably invest in local businesses, while protecting efficiency, to influence health at the population level.

Relative wages

By plotting the median annual earnings for staff working in NHS provider organisations on a map (see Figure 2), we can see that there is a very different pattern in how much people earn working for the NHS compared with the overall economy in each STP area (see Figure 3).


Note: data represents salary per headcount member of staff, not full-time equivalent.


There is more variance in wages across the wider economy than within the NHS (see Figure 3). This is what we would expect to see because most staff working in the NHS provider sector are contracted within a nationally agreed pay deal, Agenda for Change (AfC). However, there are some significant differences in how much an individual working for the NHS earns depending on which region they work in. In London, for example, wages are at least £4,600 a year more, on average, than outside London, a result of an uplift built into staff pay under AfC. However, outside London there is still almost £6,000 difference in the median amount earned by NHS staff in different areas (£28,047 in Joined Up Care Derbyshire compared to £22,132 in Humber, Coast and Vale STP). Theoretically, there should be little variation across regions, given the national pay deal, although there is some flexibility to address local recruitment and retention difficulties. One possible explanation for the variation we are seeing could be a concentration of local staff at the lower or higher pay points of their band.

These figures only cover earnings for roles in the NHS provider sector; including the commissioning sector and roles in subcontracted organisations would produce different figures. Working patterns in the NHS, where part-time working and shift-working are common, are likely to be different to patterns in other sectors. Our figures on earnings include full-time and part-time workers. Industries with a higher number of part-time roles are likely to pay less in total earnings to staff (on average, total earnings for the retail sector are lower and those in manufacturing are higher than in the NHS, for example).

If we look at the relationship between the ratio of NHS earnings relative to the wider local economy and income deprivation within STPs, we can see that as the proportion of people living in income deprivation rises, the amount earned on average in NHS provider organisations increases.


In some areas people working in the wider economy have higher average earnings that those working in the NHS, but this usually occurs in areas where people have unusually high average earnings, such as Surrey or Buckinghamshire. Nationally, on average, employees in the NHS provider sector earn 7.3 per cent more than workers do on average in the wider economy. The largest difference between NHS and wider economy earnings is seen in Nottinghamshire, where on average an NHS provider sector employee earns 30 per cent more than the average worker in the wider local economy.

One of the key features of an ‘anchor institution’ is to act as a leader in terms of local employment. Many anchor institutions regard their pay levels as an investment in their local area, money that will be spent locally to improve conditions for local businesses and encourage economic growth. Given the importance of income in determining health, the financial rewards and job security that working in the NHS offer are an opportunity for health systems to influence population health.

Investing in skills and opportunity for people

We should not just focus on how much the NHS spends on people and supplies. As the Royal Society for the encouragement of Arts, Manufactures and Commerce highlighted in 2016, many areas in England underwent significant industrial change in the 1970s and 1980s, concentrating job opportunities in regional urban centres and creating inequalities in economic opportunity that have not been properly addressed since. In this context, it is even more important for NHS organisations to support their local economies to improve growth and help address the health inequalities that are so closely linked to economic inequality.

The NHS cannot redress all those shifts alone, but by partnering with other organisations locally and working at scale themselves, NHS organisations can provide opportunities to their own staff and people living in their local areas. While the NHS has little flexibility locally to adjust wages, there is much more flexibility with recruitment and training and some NHS provider organisations are already taking advantage of this. Local NHS providers can access central funding, as well as their own organisational budgets, to offer training and continuing personal development opportunities for their staff, allowing them to develop within and beyond their day-to-day roles and improve their skills. Apprenticeships are also being increasingly offered as a first step into work, and the NHS has historically provided bursaries to nursing and medical students.

An important role of anchor institutions is to invest in skills and training for local communities, which also benefits organisations themselves through a better skilled and more effective workforce, but NHS providers are being left without the funding needed to provide this. As we have pointed out before, investment in training in the NHS has been falling, from 5 per cent of total health spending in 2006/07 to slightly more than 3 per cent in 2018/19. According to the NHS Staff Survey, the proportion of staff receiving any training, learning or development in the past 12 months (other than mandatory training) has been flat over the past 4 years – at 73 per cent in 2015 and 71 per cent in 2018 – so there is plenty of potential for more staff to undertake additional training. The Chancellor announced an increase of £150 million in Health Education England’s budget in the 2019 Spending Round, the first increase in 6 years.

NHS England’s full People Plan, due later this year, will be an opportunity for the NHS to make a renewed commitment to providing opportunities for professional development for NHS staff and people living in areas with limited economic opportunity who could benefit financially and in terms of wellbeing from the job security and professional standards that the NHS can offer.

Some examples of NHS organisations investing in skills and local opportunities for local people can be seen in the Health Foundation’s work: Leeds Teaching Hospitals Trust has partnered with Leeds City Council to target career opportunities towards communities in the most deprived local areas; Bart’s Health NHS Trust has a proportion of roles reserved for local candidates identified by the local council; and University Hospitals Birmingham has partnered with The Prince’s Trust to establish a learning hub – a purpose-built centre that offers ‘pre-employment advice, training, guidance and direct links to jobs in the NHS to unemployed local people and those furthest from the labour market’.

Conclusion

The NHS is often talked about as the biggest employer in England, but thinking at this scale can overlook the local importance of the NHS in areas with higher levels of deprivation. In these areas the NHS is a key employer, providing good terms and conditions and opportunities for high-quality, professional work, and contributing to the local economy by investing in the region and in training and education for staff.

The NHS can use its national and local roles together to create sustainable employment for local communities that helps develop the local skill-base and affects the root causes of ill health and health inequality. To continue to miss that opportunity at a time when health at the population level has never been more important would be disappointing. The move towards ICSs gives the NHS the chance to take new and innovative steps to reduce health inequalities and affect the economic determinants of health in a way it has never done before.

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Comments

G

Position
Analyst,
Comment date
16 January 2020

The NHS role in the economy and its impact on health care and medical research funding

Mention the NHS in any conversation and you will quickly come to the subject of money and its perennial shortage. According to Kings Fund "Most funding for publicly-funded health services in England comes from central taxation, with overall NHS budgets set by national government." In other words the government can, it seems, only spend out of a pool of money already collected. Now that seems a bit strange because, as the country's largest employer the government can effectively spend that huge amount into existence by merely creating it from nothing.

If this seems strange let me describe the process if there was no such thing as a monetary economy; suppose we existed on the consumption of what we grew - money does not exist. Then someone has the bright idea of building a hospital, but she needs materials and labour to build it. Arguably, the only entity capable of being able to guarantee the provision of a commodity named money to support the task would be a government.

So now you see that in any economy the initial creator of money is a government ; furthermore it faces no constraints - it can create as much currency as it wishes. But you say, it can't just go on borrowing for ever. But I say, who said anything about borrowing - you don't have to borrow something that can be created at will.

There are two big issues that arise from this scenario:
1. Because a government can create money it does not have to rely on taxation to be able to spend.
2. A government is nevertheless constrained because there are only so many resources (labour, materials etc) available in an economy. If it tries to outbid other users of these resources it will force up prices and inflict the agonies of inflation on the population.

Now you see why a government running an NHS will encounter money shortages - because it has to compete for resources, and unless it can command who has the right to those resources it can only acquire them by depriving the rest of the population of their use (hence taxation as a re-distribution process). This is bound to lead to conflict over the priority that should be given to how those resources are used. In a democratic society this battle is settled by whether people tend to support Socialist or Capitalist governments.

So, you see that whilst in theory there is no reason why governments should withhold funds for expansion of the NHS and attendant medical research,, the reality is not so simple; indeed NHS expansion throughout the existence of this great social institution has relied largely on the increasing productivity (prosperity) of the populace.
Unfortunately the NHS has never been enough to satisfy our demands to enjoy a healthier life and also to live up to our prosperous opportunities.

Paul Quarmby

Position
Sustainability Advocate,
Organisation
Sustainable Leeds
Comment date
17 January 2020

Great, for years we have been talking about the influence any large organisation can have on the economy, the lives and wellbeing of the people of a locality & region, but that is all that has happened. Up to now we have all been told that government funded organisations have to package and tender their purchases and inputs and ensure probity and value for money by accepting, effectively, the lowest price, European legislation also enforcing such and frightening those in control into working with and employing large and often multinational suppliers, contractors and consultants, a major issue preventing effective benefit of the local...

I would also ask you to consider the negative power of the NHS and Local Authorities. The belief that social good, health & wellbeing are the responsibility of the NHS & Local Authorities, both inside and outside those organisations is effectively stifling local projects, up-stream healthcare, 4th sector and local groups who wish to help improve lives. It is clear, going back to Marmot & Wilkinson, and even in local folk-law that the Social Determinants of Health are outside the control and influence of cash strapped, appointed, health & social care providers.

If we are to make a difference to the health & wellbeing of the population the NHS & Local Authorities must either be funded properly or they must be allowed to, and want to, ( putting to one side their vanity ) use the multiplier of their market presence and statutory appointment as providers of social goods and help and facilitate outside providers, groups and individuals to help.

David Sandbach

Position
CEO,
Organisation
Yockleton Institue for Economic Development
Comment date
17 January 2020

The NHS can help stimulate economic activity in many of the high streets in the country. This can be done by moving Out patient departments / activity to venues near to a towns central bus or rail station which are often located near to or along side the traditional shopping area in a town.

By shifting foot fall from the hospital campus (usually on the outskirts of town) commercial premises in town benefit through additional daily foot fall which will start around 8.30 am and go on till 18.00 pm Monday through Friday. The net effect is increased economic activity when many shops are currently open but bereft of trade = more income and more tax for Mr Javid and his pals.

Also by putting OPDs in town centres the civic life of the area benefits since more people are likley to use the centre for social purposes. WIn win win. What is not to like?

G

Comment date
20 January 2020

Your suggestion is worth exploring David for several reasons:
1. Town Centres in many areas of the country have been in decline for some years and now appear like derelict properties awaiting alternative revival or demolition.
2. The growing demand for Integrated Care Services lends itself to the redevelopment of underused Town Centres, especially where plans are already afoot to nurture residential communities catering predominantly for an ageing population.
3. Town Centre parking charges for vehicles needs to more adequately address the predominant needs of users, especially those who are more limited in gaining access.

Brendan Clifford

Position
Service Director,
Organisation
Black Country Councils
Comment date
22 January 2020

This is important work.
From a Local Authority perspective, it may be that Local Authorities themselves are perhaps the first Anchor Institution in local areas. So a broader public sector perspective may be worth reflecting on.
Work has been done on the economic contribution of adult social care in localities. Wolverhampton was the first to do at LA level. Skills for Care have reported nationally and regionally for some years. Adult Social Care is a very largely marketised and commissioning system rather than a commissioning as internal trading model.
Some would object to these statist arguements, in any event.

G

Comment date
23 January 2020

As someone directly involved in setting up an Anchor Institution Brendan, you will appreciate the quote "If you think competition is hard, you should try collaboration" uttered by an Integrated Care Leader. Nicholas Timmins also says in a King's Fund piece that "integrated care requires the dilution or destruction of the long-standing barriers between hospitals, GP practices, community services and social care, with the health system also working far more effectively with local government in tackling the broader determinants of population health".

Trying to combine such a diverse group of entities in a co-operative project represents a venture that would tax the most dynamic of commercial enterprises, never mind organisations that have humanitarian responsibilities as well as stringent accountability.

These manifestations of social change are being repeated on an international scale as economies adjust to the lifting of a decade of austerity introduced at the time of the Great Financial Crisis in 2008. Other upheavals are contributing to a scenario that will test the most creative of Local Authorities, primary care organisations and an evolving social care sector as it adjusts to increasing populations of aged residents. This involves new ways of dealing with infirmity, patient treatment/support as well as advanced diagnostics.

Local Authorities, among their many responsibilities, are tasked with accommodating the elderly in increasingly specific housing communities, with access to town centre facilities that comprise suitable shopping. medical and entertainment attractions. At the same time councils need to tackle the huge decline in retail use that is synonymous with on-line shopping, traffic restrictions and a changing era of human experiences.

I wonder if the following link is a typical example of the way medical facilities will be localized and consolidated: http://community1stoldham.co.uk/in-my-area/oldham-integrated-care-centr…

These are exciting times for those with an optimistic outlook and it will be interesting to keep abreast of leading players in what amounts to both commercial and social opportunities.

G

Comment date
28 January 2020

I am sure Brendan that what you have set up at Wolverhampton owes much the to weighty skills known increasingly today by the modern title of "organisational development". Indeed, Wolverhampton's extensive involvement in a wide range of social care matters suggests that leadership qualities are integral.

But leadership, as is self-evident, comprises more than organisational ability; displayed in Wolverhampton's instance with the "what makes you proud" case studies. Here is a gesture that exemplifies the humanitarian aspect of managerial responsibilities, over and above the accountability measures so typical of organisational comparatives.

There is an increasing emphasis on the requirements of organisational leadership. The more so because it is recognized to be essential to the control of highly diverse combinations of Primary and Social Care.

It would be wise to keep in mind Wolverhampton's example (referred to below) among the many claims to managerial expertise and the ability to juggle balls of various shapes and sizes.

Case Studies:

“What have you done today to make you feel proud?”

Directors of social services in the West Midlands have been reflecting on the question “What makes you proud?” As part of a short survey led by Improvement and Efficiency West Midlands, directors have been sharing the stories that make them proud and demonstrate why they continue to strive to care for the most vulnerable members of the community.

Interestingly, the responses don’t focus on how good their strategic plans are, how much money they saved in the last 12 months, or how far along the digital road map they are. Important as all those things are, it’s the difference their services make that’s key. The responses came in the form of a range of positive stories, demonstrating how the interventions of those working in social care continue to transform people’s lives, by keeping them living independently and helping them to thrive. The case studies have also demonstrated how important service users are in shaping the services they receive.

One month since Martin and Andy first posed the question, personal stories and case studies continue to come in. The stories demonstrate the huge positive impact social care workers have on older people, and people with learning disabilities and complex medical conditions, supporting them in ways that are personal to them. The case studies reflect on the complicated lives service users face and the measures social care workers are taking to successfully prevent them from becoming dependent on long term expensive placements in hospital or in care homes.

A selection of these case studies will be made available on our new website, due later this year.

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