There remains a worry that the government’s efficiency drive is still focused on short term savings that may not ultimately deliver the benefits to patients it claims, writes King’s Fund chief economist John Appleby.

For students of American presidential campaigns, Bill Clinton’s strategist James Carville’s sign to keep his boss and others focused for the 1992 campaign read: Change vs more of the same; The economy, stupid; Don’t forget healthcare.

Different country, different times and different circumstances, but Carville’s exhortation looks unnervingly appropriate for the British government. And, if you want to read no further, the digested read of the Commons health committee’s latest report into the expenditure of the NHS is a variation on Carville’s second point: “It’s the money, stupid”.

It’s a message that Stephen Dorrell and his colleagues on the committee have been consistent in expounding. Just seven months after the general election in 2010 and only weeks after the spending review, the committee’s first report on NHS spending characterised the main productivity task for the NHS as the “Nicholson challenge”.

More than a year on, their new report, published last month, reiterates: “The Nicholson challenge is the key issue facing the health and care system.” Indeed it is, and the enormity of the challenge certainly bears repeating.

Dorrell’s challenge of course is not aimed at the NHS – can there be an NHS staff member still standing who has not got this message? – but rather at the government. The big worry, as the committee said in its first expenditure report, is that the government has not only failed to provide a clear narrative on its vision for how savings are made, but has embarked on organisational upheaval on an unprecedented scale. A year on and the committee might at least have hoped that the Health Bill would have made it to the statute book and that the NHS would have some management headroom to focus on its productivity challenge. No such luck.

Future health policy textbooks will contain a new chapter on the NHS’s current reforms. It is hard to see these historical write-ups as anything but highly critical of the policy process. Time will tell what the historical verdict will be on the outcome. One assessment seems difficult to avoid; it is unlikely that the changes proposed in the bill will have contributed much if anything to achieving the Nicholson challenge.

Indeed, evidence to the committee from the Department of Health implies as much. NHS chief executive Sir David Nicholson described 40 per cent of the £20bn savings over the next four years as coming from “national action”, another 40 per cent from “operational efficiency”, and 20 per cent from “service change”. In effect, the plan is, and has been since 2009, a combination of price squeeze through the tariff, a pay freeze, management cost cuts and cuts to national budgets, with no mention of anything which could be interpreted as embodied in the bill.

The DH’s savings strategy looks like it is working so far – at least according to David Flory’s look at the second quarter of NHS financial performance: six months in and the NHS has saved £2.48bn – 42 per cent of plan for this year. The King’s Fund’s own quarterly monitoring report published last month also suggests that while this year’s savings programmes are tough – around 5-6 per cent on average – there is reasonable confidence they will be met.

Relentless pressure

But Mr Flory notes in The Quarter the decreasing returns to scale aspect of savings tactics, pointing out that “the potential to reduce costs through standard approaches to efficiency will decrease in value over time”.

What of course must loom large in many managers’ minds is the relentlessness of the QIPP initiative. How far up the decreasing returns curve are they going to find themselves next year? And the year after? And… well, let’s not go there just yet.

For the health committee the big “Dorrell challenge” is to go beyond salami slicing a bit off patients’ length of stay, or postponing repairs to the gutters. It is about “redesigning the way health services are delivered now, in order to deliver lasting long term benefits”. The committee also emphasises the need for better integration of health and social care “for there to be any chance of a high quality and efficient service being provided which meets the needs of the local population within the funding available”. It returned to this theme in last week’s report on social care, highlighting comments from Sir David himself that a failure to deliver integrated care could have “serious consequences” for standards in health and social care. This is a good reminder of what really underlies the whole purpose of the Nicholson challenge. It is not just a savings programme – and certainly not simply about making ends meet in the short term. It is about benefits to patients. The big challenge wrapped up in the QIPP initiative is measuring the extra value patients should be getting from every healthcare pound spent.

If James Carville had been an expert adviser to the health select committee he might have suggested an amended version of his original sign: Stability vs redisorganisation; Value for money, stupid; Don’t forget social care.