Alistair Darling spells out real terms cut to the NHS budget

Alistair Darling’s report says “frontline” NHS spending will “rise in line with inflation” in 2011-12 and 2012-13 – the equivalent to a real terms freeze.

But he defined “frontline spending” as the “95 per cent of spending that supports patient care”. Chief economist of the King’s Fund John Appleby said that implied the remaining 5 per cent (the equivalent of around £5.25bn this year) would be cut.

Professor Appleby said: “When he says ‘protecting spending’ the chancellor seems to mean that 95 per cent of the NHS budget will be frozen in real terms, leaving 5 per cent that is not even protected in that way.”

Cuts to that 5 per cent could include funds for staff training, NHS research, central budgets and administration, he said.

He said a real terms freeze for 95 per cent of the budget coupled with a cash cut for the remaining 5 per cent would inevitably translate into a small real terms cut across the entire NHS budget.

Professor Appleby said the NHS faced an annual 6 per cent gap between the resources Sir Derek Wanless had projected it would need and available spending after 2011-12. It was those projections on which the Labour government originally based its NHS spending plans.

But today’s announcement from the chancellor that headline growth in public sector pay would be capped at 1 per cent could alleviate some of that funding gap, reducing it from 6 to 5 per cent, as Sir Derek’s original projections had assumed pay would increase by 2.5 per cent above inflation each year, Professor Appleby said.