The NHS Confederation has warned that the febrile political environment has “left behind all rational debate” over health service funding over the next five years.

Confederation policy director Nigel Edwards’ comments came after politicians from both the main parties moved swiftly to reject the NHS cost saving scenario mapped out by management consultants McKinsey, revealed by HSJ last week.

The consultants had identified up to £20bn of “recurrent potential savings” in a report for the Department of Health - much of which would come from cutting posts by around 10 per cent. This would reduce organisations’ pay bills by between 9 and 14 per cent.

The idea that you should not be running some quite radical scenarios to test your plans is simply wrong

Although staff reductions of similar and greater size have been openly discussed by NHS managers over recent months, once the figures were in the public domain health minister Mike O’Brien said: “The government does not believe the right answer to improving the NHS now or in the future is to cut the NHS workforce.”

However, he said it was “absolutely right that every government department looks for efficiency savings and examines all avenues for doing so”.

Shadow health minister Andrew Lansley said: “It is a fallacy to think that central government should be seeking to cut the clinical workforce at a time when demand is rising. Instead we need to begin to manage that demand much more effectively.”

He said Conservative plans to make GP pay more dependent on patient outcomes would encourage them to commission better value care as they would be incentivised to make a saving on their practice budgets to reinvest in better care.

Mr Lansley said a Conservative government would not prevail over any significant cuts in the NHS workforce but efficiencies and improvements would lead to “changes in the way staff are deployed”.

NHS Confederation policy director Nigel Edwards told HSJ the heated political environment with a general election expected in May meant “all rational debate” had been “left behind”.

He said the scale of the expected shortfall in NHS funding over the next three to five years meant efficiency savings now had to be “cashable” as opposed to merely about increasing productivity or quality for the same amount of cash.

That would inevitably mean headcount reductions but also cuts to fixed costs, Mr Edwards said. “You can’t hope to take all the saving out of staffing, some of it has to come out of fixed costs. But the idea that you should not be running some quite radical scenarios to test your plans is simply wrong.”

Although ministers have distanced themselves from the McKinsey report it was more than simply a speculative exercise. A wider group of management consultants were initially asked to present their summary ideas to the DH and McKinsey was selected to come back with further details.

In a report of more than 100 pages the consultants mapped out the “opportunities” to make up to £8.8bn in new cost efficiencies a year by 2013-14.

They highlighted gaps of 40 per cent or more between the recommended day case rates in some specialties, including breast surgery, gynaecology and urology.

Bringing rates up to the recommended level would require shorter patient stays in hospital, reducing acute staff costs.

McKinsey’s analysis also found that the least productive 10 per cent of doctors and nurses did just a fifth of the workload of the most productive.

In total up to £4.9bn of the £8.8bn in new cost efficiencies identified were pay costs. The consultants estimated the redundancy costs associated with reducing those could reach £530m over three years.

But it said that cost would be just a fraction of the total potential annual savings of £20bn which could be found after five years if all reforms were seen through, which would add quality improvements to cost cuts.

That would include tackling some 33 separate hospital procedures which the report identifies as having little clinical benefit. Decommissioning these services would save the NHS up to £700m, which McKinsey said could be spent on more effective treatments.

London braces itself for more reorganisation

As the NHS in England prepares for efficiency savings of £20bn by 2014, organisations in London have been told hospitals must prepare for even more changes than they had planned.

A report sent out by NHS London says plans to shift more care out of hospitals and into GP practices and polyclinics will lead to hospitals in the capital needing just two thirds of beds under current models.

Acute hospitals in London face a drop of up to 72 per cent in workload and a 42 per cent cut in income by 2016-17. It warns acute trusts to rapidly rationalise fixed overheads or face annual unfunded costs of up to £3.4bn - more than 60 per cent of their projected income of £5.5bn a year.