There will be no money - and no rationale - for propping up failing NHS services, the former health minister warns

NHS managers are going to have unprecedented tough budgetary conditions to cope with for most of this decade. Politicians’ bland platitudes about “efficiency savings” and “protecting frontline services” are not going to help them cope. Things are so serious that we need to start levelling with the public and the public services about what lies ahead.

Nearly every MP I met as a health minister told me how wonderful their local hospital was and yet many of these hospitals have high overheads and include some expensive underperformers with dangerous levels of infections

The NHS provides reasonable quality healthcare at a price that is the envy of many countries. That does not mean it should not have performed much better with the investment it has received. Despite NHS revenue nearly doubling in the past decade and an investment of nearly £30bn in capital assets, Office for National Statistics data shows NHS productivity falling consistently from 1995 to 2004. Only in 2005 and 2006 did it rise a little, when then health secretary Patricia Hewitt and I got into political trouble for energetically pursuing NHS reform and control over NHS finances. Between 1997 and 2007 healthcare inputs went up nearly 60 per cent, but outputs went down by about 4 per cent.

About two thirds of those inputs are staff costs. If NHS chief executive Sir David Nicholson’s aspiration to save £20bn is to be delivered something dramatic will have to change. The whole area of national pay bargaining, NHS working practices, pensions, use of agency staff, costing of national pay deals (the consultant and GP contracts, and Agenda for Change) need to be critically examined.

Private sector staff are accepting pay freezes, cuts and reduced working weeks to save jobs. Social equity suggests there should be some movement in these areas from NHS and other public sector staff. These ideas will not be well received among NHS staff interests but they cannot be avoided.

Alongside these difficult staff issues there is the balance between what the NHS spends on acute hospitals and services outside hospital. Nearly every MP I met as a health minister told me how wonderful their local hospital was and yet many of these hospitals have high overheads and include some expensive underperformers with dangerous levels of infections.

As Sir David has asked: “Can we say we have done our best when 25 per cent of patients in hospital beds don’t need to be there and could be looked after by NHS staff at home?”

Burden of debt

The foundation trust legislation was passed in 2003 but nearly half of acute hospitals are still not good enough to be FTs. Over 40 have historic debts and many do not generate the surpluses to pay this back, so the burden falls on the rest of the NHS. We bail them out because of the lack of political and managerial will to rationalise acute services through closure and mergers. We have paediatrics and maternity departments losing money, some operating at dangerously low levels of activity. London is the most blatant example of money wasted.

Labour has more than doubled spending on GP and community services, yet these still lack proper performance measurement. Primary care trusts often lack the will to replace underperformers, and there has been a political reluctance to apply the principle of allowing any willing provider to replace poor NHS hospital and community services. The health secretary’s NHS preferred provider policy is a cul-de-sac that needs to be reversed from quickly.

Yet we know the public want services closer to home. But unless there is the political and managerial will to downsize the acute hospital sector there will not be the money and staff to fund this approach. As the NHS moves from feast to famine this issue of a better balance between hospital and community delivery of health services - including health promotion - needs higher priority.

Between 2005 and 2007 I led a big push to make the NHS a commissioning led service, with more patient choice and competition between a greater diversity of providers. This did not go down well with many of the vested interests - and Patricia Hewitt bravely took most of the flak. Both the main parties have backed away. We still have far too many PCT commissioners - 152 - with many lacking the competence, muscle and political encouragement both to tackle the acute hospital problems and to use choice and competition to drive quality and efficiency.

Unless we get back to these aims quickly the NHS will lack the capacity to respond to the tougher financial climate it faces. This requires reducing commissioners by about two thirds; expanding practice based commissioning; adopting a transparent policy and level playing field market open to any willing provider; and an acceptance of failing providers being speedily replaced. A failing NHS service is little different from any other failing business; it does the public no favours to keep propping it up.

Health ministers after the election face a shortage of tools and little in the cashbox. There may have to be an eating of campaign words and a focus on serious reform under the beady eye of the Treasury. As the physicist Ernest Rutherford said: “We haven’t got the money, so we’ve got to think.”