Health secretary Andrew Lansley assures HSJ editor Alastair McLellan that funding is still to rise annually - but the scale and rationale for any increases will differ vastly from recent years

Health spending will no longer rise as a proportion of national income, says health secretary Andrew Lansley.

At the start of the last decade Tony Blair promised to match average European health funding as a proportion of gross domestic product. The pledge drove seven years of increases in the NHS budget that far outstripped inflation.

The coalition government is committed to “real terms” rises in NHS funding, but Mr Lansley is clear this will be constrained by economic growth. He points out that “if we carry on as we are”, the new Office for Budget Responsibility has said health and social care spending will rise from 9.2 per cent in 2009-10 to 9.9 per cent by 2019-20.

“We can’t do that,” he declares. “We can’t have a constantly rising proportion of our national income being consumed by health and social care. Spending must be consistent with a real terms increase each year. But it is clearly going to be a very modest increase [that] is consistent with [NHS spending] being a broadly stable proportion of GDP.”

He confirms that cumulative efficiency savings in the order of £20bn by March 2014 or 4 per cent per annum are essential.  

“Think about this in terms of unit costs. People are fixed on ‘what is their budget’. This is not a £20bn cut in budget, it is a saving in unit costs. Alongside this discipline is the incentive that all of this money can be reinvested.”

The reconfiguration of hospital-based services is central to realising these savings for many health economies.

Mr Lansley has introduced a four-part test which has halted many planned reconfigurations, most noticeably in London. So is the health secretary in danger of undermining the efficiency drive from the start?  

“I don’t accept the premise that these reconfigurations were going to deliver short-term reductions in cost. Some of them were designed around the proposition - London especially - that delivering services in the community is cheaper. That’s not evidence based,” he says.

The new guidance calls on local health services to engage more closely with GPs and the public, providing evidence that changes will deliver better outcomes. Do that, says Mr Lansley, and efficiency savings “will happen quicker”.

So what - apart from alleged lack of consultation - is wrong with proposed reconfiguration plans? Mr Lansley says “most of these reconfigurations” betray a view of commissioning which is too deterministic.

He sketches out a scenario in which commissioners analyse epidemiology and demographics, “decide how many patients there are going to be and [then] try to allocate them to hospitals.

“In the future, commissioners should commission for contracts which allow them to make the referrals they wish to make and which would give patients real choice. To that extent, providers will be making more of their own decisions about whether they should provide services.”

GP commissioning

As an example, NHS London, he says, “perfectly reasonably” wanted to improve hyper-acute care for stroke. It started well in his eyes by putting together a panel to study which hospitals should provide services.

He believes NHS London should have then invited “bids” from providers and contracted with any that could meet the required standards. Instead, he claims, NHS London decided how many providers were necessary and drove the reconfiguration from that.

“I had months of arguing with NHS London before the election about why the answer was eight [providers] and I never got any satisfactory conclusions. The only thing they could come up with was - ‘we haven’t got enough stroke physicians and nurses’.”

This, he says, did not seem to be a problem with hospitals carrying out similar changes “in the rest of the country”.

The health secretary’s mission to reorientate the NHS pivots on the central role given to GP consortia. They will contract directly with the proposed NHS “independent board” to commission services for a designated population - not necessarily equivalent to their aggregated list of registered patients.

The Department of Health sketches out part of the transition period until April 2012, when the independent board is established, in this week’s operating framework.

By 2012-13, Mr Lansley expects GP commissioning to be “rolling out”, although he admits that in a “minority” of areas establishing the new approach “might have to wait to 2013-14”.

But the health secretary is adamant there will be no repeat of the “sheep and goats” approach taken with the fundholding reforms of the 1990s. “It’s got to be a full system change, otherwise it will not work,” he says firmly.

It has been suggested that a “full system” rollout might involve the creation of 500-600 GP commissioning consortia. Mr Lansley’s view of the “right” number is simple: “I believe in a world where the secretary of state does not tell everybody how to do things.”

One question that he will be required to address is how GP consortia are held accountable for their stewardship of £60bn of public money. GP consortia will be subject to “financial control and proprietary mechanisms”, established by the NHS board, he explains. The board will also have “direct performance management responsibility for the commissioners”. The quality and outcomes framework and other “available levers” will be used to ensure consortia deliver the agreed services.

“The NHS commissioning board will have a duty to provide a comprehensive service. The board must, with the exception of national specialist commissioning and the like, ensure that commissioning consortia provide that service.

“There is always a tension between national standards and local decision making. The essence of that is going to be worked out through the issuing of commissioning guidelines [by the board]. These will determine the scope of commissioning

and will give the [GP] commissioners a basis on which they should structure their contracts [with providers].

“Eighty per cent of what they [consortia] do day by day is likely to be in accordance with the commissioning guidelines, but they will have the flexibility to do something different.”

“Flexibility” will be handled on a “comply or explain” basis, according to Mr Lansley.  

But what happens when there is a serious disagreement between the board and a consortium? Will the board, for example, have the power to replace those making local commissioning decisions?

For the only time in the interview, the secretary of state declines to give a clear-cut answer.

“We will consult on the way that might work. It depends on the nature of the relationship between the board and the commissioners. There are a number of options.”

Mr Lansley is forthright again when asked about the need to renegotiate the GP contract.

“People get very hung up about this. The GP contract is renegotiated every year. We don’t have a GP contract that embraces their commissioning responsibilities. So - by implication - we must [renegotiate].

“We are proposing to simplify and improve the QOF [which will also require renegotiation]. It must bear sufficient weight to incentivise properly GP consortia for delivering continuously improving results.”

Providers and competition

The health secretary says the DH is “still working on the precise support mechanism” to help all acute trusts achieve foundation trust status.

“It is difficult to contemplate all trusts being FTs before March 2014 - but I hope that we could achieve that”, he says. “There is scope for mergers, but I wouldn’t like people to get too excited about mergers. It is often a way of avoiding a problem by acquiring scale rather than resolving fundamental management problems.”

Mr Lansley confirms his belief that health provision should take place in “a competitive situation”, but this does not necessarily mean a greater role for the private and third sectors in providing NHS funded care.

“I don’t think we have given FTs the opportunity to demonstrate what they could do,” he says, citing the DH’s refusal to let them bid for the first wave of independent treatment centres.

“We will, as far as we possibly can - and it’s not a perfect situation - create a level playing field.”

He adds: “I want to create the most vibrant social enterprise sector in the world. That will consist of what we currently think of NHS-owned organisations, but who - frankly - should be conceiving themselves as having greater autonomy and seeing themselves as social enterprises.”