Health Secretary Andrew Lansley has indicated plans for an NHS pay "cartel" in the South West may not come to fruition if the Government can bring forward separate reforms more quickly.
Twenty organisations that run hospitals and health services in the region have proposed forming a consortium to set pay and conditions to cut costs.
Leaked documents suggested the termination of all staff contracts and a re-issue on different terms is one of a series of proposals on the table.
But Mr Lansley indicated the South West proposal – dubbed a "cartel" by unions – is "born from a frustration the national discussions have not made much progress".
The Government is looking to reform its Agenda for Change programme – which sets pay bands for across the country for NHS staff excluding doctors, dentists and some senior managers – so that it includes more "flexibility" to set pay and conditions to reflect the local market.
The minister said he would "far rather" South West health trusts adopted the national plan.
But critics believe any local pay deal will see wages of NHS staff cut, though Mr Lansley insisted this was not the case. He said: "We are not talking about pay cuts. I am not contemplating that."
To ensure pay in the public sector does not outstrip the equivalent position at a local private sector employer – which proponents say is holding back economic growth – most believe pay will have to be "dampened down", which means salaries are frozen or rise at a rate below inflation.
The NHS is under pressure to find at least £20 billion in savings by 2015.
Mr Lansley was in the Westcountry yesterday visiting the Chilcote GP practice in Torquay to discuss diabetes services with staff and patients.
