Andrew Haldenby on hospital closures and competition

A flurry of debate at the start of the year questioned whether public spending cuts should be postponed, but the polling agencies brought that to an end by demanding a concrete plan including immediate action. Last week, Royal Bank of Canada Capital Markets ranked the UK’s annual deficit position as worse than Greece, although Greece was worse overall due to a higher level of debt.

The Department of Health is happy to rack up the bills but not to worry in detail about the consequences. That job will be left to local managers

This all raises the pressure on the NHS budget. There has been no fundamental change to the situation. The health service had the biggest increase in public sector budgets over the past decade. It accounted for 40 per cent of the increase in inputs (ie labour and capital) of the entire public sector between 1997 and 2007. The Audit Commission’s latest report, on the £21bn spent on tackling health inequalities, found that it was “hard to see an obvious link between spending and improvement, or get any clear view of value for money”.

Any government will want major efficiencies and NHS chief executive Sir David Nicholson’s estimate of £15bn-£20bn is not the last word on the subject. As he told the health select committee in January, that figure was “pretty broad brush” and “not meant to be scientific”. The Department of Health is happy to rack up the bills but not to worry in detail about the consequences. That job will be left to local managers.

One positive way to achieve efficiency is the further round of hospital services closures to which local managers are rightly turning. For the government, both chief secretary to the Treasury Liam Byrne and cooperation and competition panel chair Lord Carter have given realistic statements accepting the need for closures.

The statistics give managers some clues about where to direct their efforts. The number of acute beds has only fallen by a quarter since 1988, compared with a total fall of nearly a half (from 300,000 to 160,000). And London, the North East and the North West have particularly high numbers of bed and hospital sites per head of population. NHS London recently produced an effective plan to reduce the number of beds in the capital by a third.

These are local questions and should be treated as such, but the DH is doing its best to nationalise the process. In the last round of reconfigurations, it sought to drive the process from the centre, beginning with the publication of the white paper Our Health, Our Care, Our Say. It was then surprised by an outburst of outraged local opposition, sometimes led by government ministers.

Since then, the DH has imposed further central controls on the reconfiguration process via a series of policy documents and instructions. It would have done better to strengthen the accountability of primary care trusts for performance and value for money. Key ideas here are to reduce the number of PCTs - which NHS London has achieved in practice - and to give local populations choice of trust. PCTs also need greater clarity over their ability to keep any financial savings they might make from their redesigns.

Managers may not be focused on the benefits of competition, given the central push back against it in recent months. But the recent Nuffield Trust study should encourage them to ignore the policy change by health secretary Andy Burnham. That study showed the English NHS has outperformed the other home nations with less money per head but a greater level of competition. The amount paid by PCTs to non-NHS providers has risen sharply in recent years, from £4.7bn in 2006-07 to £6.4bn in 2008-09.

PCTs are currently prevented from advancing competition by their size, and the requirement to balance competition with cooperation. Both of those factors must be addressed. Competition will support reconfiguration when PCTs introduce contestability at the level of the service rather than the hospital. The achievement of service line management will support this process.

When speaking to a conference for the chairs of NHS organisations this month, one chair asked me who would help him achieve the near-impossible and balance his budget by April 2010. I replied that it was up to him, and if he was waiting for help from Westminster, he might wait a long time. Both Labour and the Conservatives have backward-looking policies on competition and reconfiguration that are best forgotten. I hope managers can look beyond them to deliver the higher efficiency in spending the economic situation demands.