A question for commissioners: what is the “right” proportion of your annual funding to spend on mental health?

Validate your estimate by checking the percentage your primary care trust spent on mental health in 2007-08, using its programme budgeting submissions (someone in finance sent them to the Department of Health last summer). Implicit in your answer will be judgements about how care should be delivered: provider efficiency, the quality of care and compliance with the national service framework.

At around 11 or 12 per cent, you would be pretty typical. Fourteen per cent or above suggests your population’s needs are unusual, or that you are being fleeced by providers of independent sector placements, or - most likely - a historical anomaly arising from the former location of big institutions.

If anyone suggested your mental health spend could be cut to 7 per cent you would probably consider that ludicrous. Yet, in the Republic of Ireland, this was the proportion spent on mental healthcare in 2008.

The difference lies in the way care is delivered.

In Britain a strategic decision was taken 30 or more years ago to phase out institutional care. This was made possible by pharmaceutical advances, but was essentially a moral judgement. It was felt interning large numbers of people with long term illness was no longer justifiable. It was wrong.

The move to community based care during the 1970s and 1980s took on the aspect of a crusade. Little attention was paid to economics, and the new model costs considerably more than the former “warehousing” approach.

The Republic of Ireland, with a population roughly equivalent to that of south London, still structures much of its mental health system around 15 Victorian era institutions. It is a style of care the Ireland’s inspector of mental health services has acknowledged falls short of international best practice. There is particular anxiety about a growing number of children (247 in 2008) being admitted to adult units. Even the UN, in the form of its special rapporteur on the right to health, is raising concerns.

But so far the health service executive, despite this embarrassment, has disregarded Mental Health Commission calls for a directorate to oversee fundamental change in mental health services. Ireland has been hit harder than the UK by recession, and new government money for improving care quality is scarce.

No one is suggesting England should return to the days of the grey walled asylum. Mental health is one field where a decent quality of care is truly embedded in our expectations. Yet what the old institutions offered were economies of scale: the same economies we are now seeking elsewhere in the NHS under the banners of efficiency and productivity.

Consolidation is certainly the message for the so called “back office” functions. The government’s operational efficiency programme, as applied to health, is expected to save £100m next year through the use of NHS Shared Business Services and collaborative procurement. To encourage progress, publication of performance indicators on five corporate services - finance, human resources, IT, estates and procurement - becomes mandatory by the end of 2009. More intense use of the NHS estate is expected to yield a further £100m, over time.

And in commissioning the first faltering steps towards reducing the number of PCTs are taking shape in London: a cull of the quangos is another pan-government aspiration.

Aggregation is not restricted to non-clinical functions. The regrouping of pathology services is expected to save up to £500m a year. In frontline care, consolidation is the logic underpinning tariffs built around “best practice” care pathways superseding tariffs based on average cost. Smaller providers will need to match the productivity levels of their larger competitors. Reducing “variation” is good for both patient and taxpayer, but points to fewer, more specialised providers.

Meanwhile organisational consolidation continues. The disappearance of direct PCT provision, and the fate of NHS trusts unable to make it through the Monitor hoops, both point to fewer, bigger foundation trusts and local monopoly provision. It is predictable enough: in the world of foundation trusts and competition, and with restricted funds, why would nature not take its course? If the themes of the coming decade are to be productivity, efficiency and quality, the route will be “big is beautiful”. Only two obstacles stand in the way.

One, commitment to patient choice and “personalisation”, may already be being quietly sidelined. It received not a mention in Alistair Darling’s Budget speech. The other is quality. Not quality as defined in access targets and “quality metrics”, but a vision of quality that makes a return to the “big is beautiful” model of mental healthcare unthinkable. Quality based on values, not efficiency.

Of course it is possible for the NHS to make “efficiency gains” of 3.5 per cent each year, cope with negative growth from 2011, and hand three years’ surplus back to the Treasury. Whether it is possible while maintaining the quality of patient care depends on how you define “quality”.