Department of Health in-year costs under pressure

The bulk of chancellor George Osborne’s cuts to departmental spending limits this financial year will be through £1.7bn in delays or halts to contracts and projects - including “immediate” renegotiations on procurement costs; £1.2bn on consultancy and travel costs and a £1.2bn reduction in grants to local authorities.

The grants reduction will concern NHS managers if it leads to cutbacks in social care, although the Treasury gave local authorities the opportunity to counter this by removing ring fences around £1.7bn worth of local authority grants.

The chancellor said a further £600m would be saved by “cutting the cost of quangos”. HSJ understands the senior managers of a number of NHS arm’s length bodies have been called to meet the DH this week and a Treasury review of their cost effectiveness is being finalised.

The DH said funding for itself and the NHS for 2010-11 was “unaffected” by the Treasury’s announcement. But it added: “Like all departments, we need to go further in delivering additional efficiencies in 2010-11 in order to reinvest in service priorities.”

The DH said that would include savings from the “cross-government efficiency measures” announced by the Treasury. Details would come in the emergency Budget on 22 June.

It also issued a letter to all NHS chairs and chief executives confirming there would be no increase to basic pay for those on the very senior manager framework from April 2010.

Although that edict cannot apply directly to acute trusts, the letter from NHS chief executive Sir David Nicholson said he was “strongly encouraging” foundation trusts and NHS trusts to apply the same restriction.

The DH has also confirmed that the coalition government plans “ringfenced” public health budgets, which would be “held” by “local NHS organisations” that would “work closely” with local authorities and other bodies to improve public health.

The DH said it would consult on the detail of those budgets.