Health NZ says $500m pay equity payment that never came contributed to deficit

Thursday, 3 October 2024

A $529 million pay equity sum for health workers that never arrived contributed to the deficit at Health NZ – Te Whatu Ora, the agency says.

The head of the nursing union at the heart of two of these claims is describing the revelation as an insult to those on the front line.

In a quarterly report released on Thursday, Health NZ shed light on how and why its finances deteriorated from a forecast surplus of almost $300m to an unaudited deficit of $934m by June 30 this year.

In the high-up summary of the 72-page report, chief executive Margie Apa said the deficit was partly due to one-off factors including write-offs to surplus Covid-19 stock ($193m), Holidays Act payments ($172m), cuts to Hauora Māori funding, higher than expected staffing costs and more outsourcing.

But buried on page 53, the April-June report calls out a payment that never came.

“In 2023/24, we expected to receive $529 million of funding to fully offset pay equity payments to allied health, midwifery and nursing staff. This would have contributed to Health NZ achieving a surplus of $583 million.

“Pay equity funding was not received during the year, resulting in the target surplus expectation reducing to $54 million. Health NZ did not achieve this revised target surplus.'

The payments relate to three separate pay equity settlements, all finalised under the previous Labour Government.

Asked if Labour accounted for the settlements, health spokesperson Dr Ayesha Verrall said they were held in contingency.

“All pay equity deals are funded and there are contingencies for them so we only negotiate with those funds.”

Health Minister Dr Shane Reti said Verrall was “completely wrong”.

“Health New Zealand received funding to meet the cost of the pay equity for allied health and midwifery staff. Cabinet approved $419.516 million of funding which was distributed to Health New Zealand in September.

“While for the sake of appearance, this funding would have been beneficial for the Health New Zealand financial result, it would not have meant that Health New Zealand returned a surplus in that year,” Reti said.

“The Government has taken decisive steps to put Health New Zealand back on firmer financial footing. Four of the five health targets are showing signs of stabilising after being in freefall for six years – that’s what Labour should be acknowledging.”

The claim, related to more than 30,000 nurses covered by the NZ Nurses Organisation (NZNO), was settled in August 2023.

Two months later, on the cusp of the election, two further pay equity claims were settled – for 1700 midwives coved by the NZNO and 16,000 allied health workers covered by the Public Services Association.

NZNO chief executive Paul Goulter said the union always understood its claims, which took years to get over the line, were funded in full.

He said the claims had been paid out in full, but learning they are “now being captured by the cutbacks Te Whatu Ora are doing” was like a punishment.

“Our nurses are not happy about this at all. They feel it's another insult to them and their professionalism and an insult around the gender discrimination element there.

“Then there’s a hidden sting in the tail.”

Verrall said the new Government had “manufactured a cost crisis to justify cuts” to the health system.

“More than $500 million of Te Whatu Ora’s deficit was caused by Cabinet deciding not to transfer funds put aside for pay equity for nurses, midwives and allied health staff,” Verrall said.

“The actual crisis here is that staff and services are being cut and patients are not getting the healthcare they deserve.”

Apa said total spending for the full year was $1.8b greater than planned, including $908m in internal and outsourced staffing costs. Thatwas partially offset by $900m of greater than planned funding.