NHS chief executive David Nicholson has not ruled out a cash cut in NHS funding from 2011.

Speaking to HSJ just after chancellor Alistair Darling finished his Budget speech, Mr Nicholson stressed that the increases in spending promised in the last operating framework were safe.

“We said in the operating framework that for 2010-11 there would be 5.5 per cent uplift on the allocations and that is safe.

“We also said we would be able to draw down £800m out of the surpluses over the next two years and that is safe. We also said we would deliver 3 per cent efficiency through the tariff in 2009-10 and 3.5 in 2010-11 - that is safe. So all the things we said in the operating framework are absolutely safe.”

Efficiencies

The Budget said £500m could be saved by the end of 2010-11 through world class commissioning and another £500m through cutting the length of hospital stays. Mr Nicholson emphasised that these numbers were included in the 3 per cent and 3.5 per cent efficiency targets: “Any saving through world class commissioning or shortening length of stay is taken within those numbers. There is nothing over and above what I have described to you.”

Mr Nicholson’s message is that the service must use the relatively generous settlement for the next two years to prepare for the tough environment it will face from 2011.

Lower growth

“In the pre-Budget report it said the growth in public expenditure over the next comprehensive spending review period would be between 1 and 2 per cent [a year], and now they have said it is 0.7 per cent, and that includes benefits… It means significantly lower growth for the NHS than we were expecting.”

Asked if the planned public expenditure total could mean a cash cut in NHS funding, Mr Nicholson said: “We will have to look at that in a bit more detail… We will have to do quite a bit of work over the next three to four months on what it means. I can’t speculate.”

A finance director at a major foundation trust told HSJ his initial calculations following the Budget indicated he would have to cut staff by 2011-12. Asked if that was a realistic assumption, Mr Nicholson responded: “It’s far too early to say whether that will be the case. It will be clearer by the time we publish the next operating framework what all this means in practice. We need to do more work before we get too excited about it.”

He believed world class commissioning could deliver the savings required over the next two years; the tougher challenge would be preparing for 2011 onwards: “I believe it is perfectly possible for PCTs to deliver the savings [required over the next two years]. The issue for me is whether we will be ready for the next spending review [period]. I am convinced we can be, but it will take a huge amount of work and effort from PCTs to get themselves fit for those three years.”

More Budget 2009 news, analysis and blogs

Budget 2009: funding squeeze looms in 2011, says David Nicholson