David Nicholson warns NHS: 'all bets are off'

Going on a self-confessed “ideological offensive” in an interview with HSJ, the NHS chief executive said there would be a “root and branch” exploration of how best all NHS organisations can prepare now for the financial challenge ahead.

“All bets are off. We need to move away from the NHS being built for growth to being able to sustain itself in a prolonged limitation on resources,” he said.

The scale of the challenge is unprecedented, he said.

The ways we have done it in the past will not necessarily deliver in the future

“We’ve had one or two years that were difficult. We’ve never had three or four years.”

In his annual report last week, Mr Nicholson said the NHS would have to make efficiency savings of £15bn-£20bn from 2011-14.

“The ways we have done it in the past will not necessarily deliver in the future,” he said.

He said the Department of Health would “really squeeze” the NHS as soon as 2010-11, expecting it to sustain a surplus of £1bn and to increase the proportion of non-recurring expenditure from 0.6 to 1 per cent. There will be full details in the next operating framework.

But he stressed that while there was “a smouldering platform”, the message he will be giving at next week’s NHS Confederation conference is that there is still enough time for NHS managers to make the necessary changes.

“People have got to believe it’s possible,” he said, and he wants to “engage lots of people in that discussion and debate”.

The DH will lead changes that “we can only do at the centre”, he said, such as improving value for money in procurement or changing policy. “[There are] levers for change - looking at payment by results, practice based commissioning, foundation trusts, all of those things through the lens of a recession.

“For individual organisations, if you can say by driving quality and productivity in individual organisations you can get ‘x’ savings, you can get three times ‘x’ savings by looking at the whole system.”

He said: “It could be that we set ourselves the task of doing four or five things everywhere in the same way at the same kind of time, and we could create regional support teams to make that happen.”

The best primary care trusts will get help to be “even better”, he said, but in return they will be expected to help others.

The recession will bite earlier in some regions than others and new approaches to commissioning will be “prototyped” in those areas, he said.

Mr Nicholson’s comments came as shadow health secretary Andrew Lansley told HSJ he could not guarantee a Conservative government would stick to the NHS allocations for 2010-11, when the Tories could well be in power.

Asked if the Conservatives would stand by the 2010-11 PCT allocations already set at an average increase of 5.5 per cent, Mr Lansley said: “After the election maybe we have to say that George [Osborne, the shadow chancellor] must be in a position to look at the immediate needs for response to the public finance crisis we will undoubtedly inherit.”

Mr Lansley said all NHS organisations should be reviewing their budgets on a “zero basis” - going back to each area of spending and scrutinising where it fits with NHS priorities and cost effectiveness. He said PCTs should “throw out” managers who continued to do otherwise.

“The starting point is: how can we ensure the unit costs of delivering improved quality in the NHS consistently reduce rather than increase. Getting more for less is as much a discipline in the NHS as anywhere.”

Last week HSJ reported foundation trust regulator Monitor had told foundations they would need to redo their now over-optimistic plans for 2011-12.

A spokesman for Monitor said it expected foundations to “be in a position to act quickly to address any sudden deterioration in financial circumstances”. Revised plans should also review assumptions about staff levels and mix, Monitor has said.

Financial cutbacks and a new government will also coincide with the end of the three year Agenda for Change NHS pay settlement, making it harder for the service to plan to offset job cuts with wage restraint.

Trade unions have privately admitted to HSJ that they have not yet developed a strategy for negotiating public sector pay with the Conservatives, but they acknowledge something radical may need to be done if headcount reductions are to be kept to a minimum.

A senior figure at one union told HSJ that hospital or ward level performance related pay may be an option.

“It would be attractive to the Tories because it would be seen as paying for quality” he said.