The NHS must plan for a decade of austerity
After decades of underinvestment, the NHS required the turbocharging provided by the 2002 Budget. The resulting flow of funds did much good. However, with the benefit of 20/20 hindsight many would argue the money could have been spent more efficiently – although there would be considerable dispute about what should have been done differently.
One of the failures was that the investment was not viewed as a one-off injection after which growth was bound to slow significantly. That would have focused minds on driving the NHS towards a more sustainable model by 2010.
It is in the hope that we do not make the same mistake again that HSJ publishes opinion pieces from King’s Fund chief economist John Appleby and Audit Commission managing director for health Andy McKeon.
The thrust of Professor Appleby’s analysis is the “not unrealistic” chance that the NHS “faces a near real freeze in its budget for some years beyond 2015”. Even a more optimistic projection shows the NHS significantly adrift from the target set out in Sir Derek Wanless’s review of future healthcare funding.
In other words, it is very unlikely to be a case of battling through to 2015, saving £20bn and then relaxing as investment reverts back to the long term growth trend of 3-4 per cent.
Of course, at some point during the next 10 years we could see government reaching the conclusion that the NHS needs another step-change in funding, as in 2002. That could involve a significant re-engineering of another area of public expenditure to pay for it or the much more unlikely prospect of exploring a co-payment/social insurance approach. It would be unwise to plan for either.
The chances are the NHS is in for a decade of historically low investment growth and needs to plan for it in a more clear minded way than it managed to do during the recent period of largesse.
Yes, there will be bailouts – at both local and national level. NHS chief executive Sir David Nicholson was last week assuring influential figures within the ever growing coalition health reform emergency response team that finances were under control. He did so safe in the knowledge he has topsliced primary care trust allocations for what some are calling, a trifle unfairly, the “inefficient hospitals fund”.
Few would also be surprised if chancellor George Osborne finds some “extra” money for the NHS in 2014 to smooth out any particularly painful reconfigurations.
Relying on bailouts is a very hard habit to break – being the NHS modus operandi for as long as most can remember. But it is also a very dangerous strategy during such a prolonged period of stringency. Better to treat any financial boost as a bonus.
In any case, as Professor McKeon stresses, after years of restraint the first call on any extra cash will be pay. With masterful understatement he points out that “it will be hard to know where to go in 2015” in the search for further efficiencies – although he does manage to identify some areas worthy of exploration.
The likelihood of a decade in the economic freezer makes it essential that decisions taken now have the long term in mind. Time will not be the cure for measures which only patch over problems. Unfortunately, HSJ hears reports that – for understandable reasons – too many trusts are adopting a strategy of hitting the “easy” targets (mental and public health, etc) and/or putting forward savings plans they know have little chance of being achieved (and will therefore need rapid revision within the short term).
It is bad enough if care quality suffers through savings, but it would be unforgivable if those measures also failed to place the NHS on a more sustainable footing.
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Readers' comments (12)
Anonymous | 1-Jun-2011 12:27 pm
Not attempting to force through the biggest reorganisation since 1948 at the same time as this freeze would help focus minds. A long-term freeze needs long-term stability.
Personally the idea of spending the next 10 years of my life crisis managing and having to explain why patients are dying on trolleys is not part of my life plan.
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Anonymous | 1-Jun-2011 2:14 pm
An interesting article and I wouldn't dispute the thrust of it. However, given the pressure of a growing elderly population and even with far better system efficiency than we have achieved to date, I fail to see why the issue of co-payment and/or social insurance isn't even to be planned for as a potential option?
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Anonymous | 1-Jun-2011 3:54 pm
Anon 2:14
Its like 'competition' - the ostriches won't go there! Until it is too late. Or is McK already working this up, with its largest global client, the NHS? And charging millions?
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Anonymous | 1-Jun-2011 4:28 pm
This hardly seems newsworthy, being neither surprising nor impending. Whether you are a fiscal conservative or not, all public spending is, in the longer term, going to come under increasing pressure. The state of the general economy may affect the severity of the symptoms, but it can't offer a long term cure. What should the NHS do in 2015? Well, that largely depends on what is does between now and then. Failed to achieve all the potential technical efficiencies? - Go back and do it! Reduced real terms pay? - Accept it will have to rise and productivity will take a hit. Failed to achieve all the potential allocative efficiencies? Accept that the NHS is bound for another round of structural reform (hopefully of provision, from acute to community and from treatment to prevention - there are two parts to Wanless: money and 'engagement') or that the current political consensus for funding through general taxation could disapear. But cheer up! That might mean we end up with a health sector like that in France and, apparently, it's really quite good.
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Anonymous | 1-Jun-2011 6:57 pm
Time for some more radical thinking. The NHS should not be given special treatment in future public exspenditure rounds especially if it involves reducing spending in areas with a positive impact on health and wellbeing. It is at least as self defeating to bail out current services if they are are part of service patterns with low effectiveness. Poor financial performance should be used as an opportunity to re-shape services not sustain them. Since doctors are so concerned to prevent the privatisation of the NHS, they should all be expected to work for the NHS (especially GPs) and severely restricted in the amount of additional income they are able to earn (a survey of Spanish practices and actual earnings as opposed to salaries would be instructive for the general public). The National health service should be dismantled (but not privatised, the DH incorporated into a single Department of Community Services services, and local health commissioning located within unified local public service authorities based on local democratic accountability. Then we could make a start on ineffective practice and patient safety........ Or as 4.28 implies we can always take our pensions to France, I suppose.
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Anonymous | 1-Jun-2011 8:13 pm
anonymous 6.57 must be working in an area with a much more switched on local authority than I am. The local authority knows very little about commissioning and cannot seem to get its head round it.
Nor do I see much democratic accountability - what I see is local political interference which is more about making a name for an individual than it is in developing great services for local people. The concept of open and transparent competition seems to be unheard of.
If this is the future of commissioning for health services I would be seriously concerned.
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Anonymous | 1-Jun-2011 10:22 pm
As one of the majority of consultants (outside London) who does no private practice, it would be absolutely fine by me to have all doctors work only for the NHS. If you make the rules differently, though, you can't be surprised if people play it to their advantage.
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Anonymous | 2-Jun-2011 12:38 pm
I totally get the look ahead re period of austerity, and to a large extend believe that there is still waste to strip out of the system and agree that a forward look in 2002 would have enabled us to invest differently into redesigned services. Crippling us right now and into the future, however, is the basic pay structure of the NHS, the tortuous process by which individiuals organisation would have to go through to negotiate pay changes, we have landed ourselves with a pay structure that basically rewarded staff year on year regardless of performance or productivity until you get stuck at the top of your pay spine. A significant contribution to looking at the 'new nhs' would be to sit down a work through the pay issue - unions are keen to take us on at the moment, safe in the knowledge that over time they have managed to land fantastical pay deals for our staff, however now refusing to believe that they are unaffordable, and in some cases locally stating that they do not believe jobs will go and it is a management issue. PLEASE can the DoH look at thi issue - I know its a political hot potato - but if we really are to dig out costs to such an extent, surely it is fairer to our staff to make them more affordable to employ.
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sjburnell@focused-on.com | 2-Jun-2011 3:18 pm
"Austerity" is not in itself the biggest problem, it will be the ability & freedom to "Plan" [and implement] with certainty & consistency so that viable & sustainable improvements can be progressively introduced as quality is continuously improved whilst the cost of patient support & recovery is gradually reduced through better processes, more integration, more intense cooperation, & technological break throughs.
Does it matter if the Top Consultant earns nearly as much as (or more than) a Successful Chief Executive, IF they are working together to deliver Significantly better Outcomes @ Much Lower Costs?
However, we must accept that some areas will need some investment in the interests of Quality & longer-term Savings. For example: we might need to put 50% more money & lots of time & talent into Dementia Services over the next 7-10 years if we want to get 250% higher Diagnosis & Support. This will need intense cooperation & deeper integration of Health & Social Care plus support of 3rd Sector & Independent Providers too.
Pooling the talents & money of NHS & LA is needed in this case & success should earn more investment to ensure we get the required productivity & quality.
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SandsofTime | 2-Jun-2011 8:08 pm
Never glad confident morning again
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Anonymous | 6-Jun-2011 8:31 am
The NHS cannot afford to keep treating people in the way that it has done. It needs a complete overhaul; revisiting the founding principles ie to provide essential care free to all at the point of delivery. If care can be differentiated as life-preserving or life-enhancing, then the life-enhancing stuff can be charged for whilst life-preserving care is free.
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Anonymous | 6-Jun-2011 6:07 pm
If only the NHS was a rational investor. Alas. No DoF ever got sacked for hitting financial balance this year but storing up trouble for the future by failing to properly invest in long term impacts.
Time to change the rules. Amazing that in all the Lala re-disorganisation, visible from space, this simple constraint that drives so many poor decisions, remains unchallenged.
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