NHS organisations are preparing to have to shave a third off their running costs if the Conservatives take power next year.

Shadow health secretary Andrew Lansley announced at the party’s conference in Manchester this week that within four years the Tories would cut £1.5bn from the annual cost of NHS administration.

There is a risk the reason things go wrong is because we have too few managers

Wrightington, Wigan and Leigh Foundation Trust chief executive Andrew Foster

The running costs - including management - of primary care trusts, strategic health authorities and the Department of Health were highlighted as targets, along with health service quangos.

Mr Lansley said he had “no doubt” that the health service needed to make the £15bn-£20bn savings called for by NHS chief executive David Nicholson by 2014, and that cutting the cost of NHS bureaucracy would form one part of those savings.

He said afterwards: “To make the NHS successful, we must devolve decision making closer to patients. In doing so, we’ll save substantial sums of money. The NHS must be well managed but that’s not about expensive bureaucracy - it’s about lean and good quality management.”

The Conservatives estimated current annual NHS administration costs total £4.4bn - comprising £2.1bn spent on PCT running costs, £1.9bn on quangos, £200m on the DH and £100m on SHAs.

Mr Lansley did not say whether each of these areas would feel the weight of cuts in equal proportions.

NHS managers supported the call for bureaucracy to be reduced. But they warned that good managers were needed to design services and free clinicians to deliver them, especially in difficult economic circumstances.

NHS Confederation chief executive Steve Barnett said: “[Managers are] experts in dealing with the sort of changes on the ground that need to be made, so in that sense they are part of the solution.”

Wrightington, Wigan and Leigh Foundation Trust chief executive Andrew Foster added that it was always possible to cut costs, but he thought it was essential to protect general management in particular.

“There is a risk the reason things go wrong is because we have too few managers,” he said.

But he said the NHS would benefit from having fewer transaction costs.

“The bureaucracy that exists around contracting is something that’s growing all the time,” he said.

Mr Foster did not think much could be stripped away from SHAs.

“I don’t think you can take the SHAs much below what they are now and have them doing anything meaningful,” he said.

However Salford Royal Foundation Trust chief executive David Dalton suggested there were some functions currently carried out by SHAs that could be “properly and appropriately hosted in organisations within regional boundaries” - for example quality observatories.

“They could instead be hosted by organisations and networked across to members on the basis of subscription,” he said.

There could be greater sharing of back office functions by all NHS organisations and it “does not seem sensible” for community health services to set up their own management teams, he added.

County Durham and Darlington Foundation Trust chief executive Stephen Eames said cutting costs was likely to mean fewer NHS organisations of all kinds.

“There is arguably duplication in management of services [currently] between secondary and primary care,” he said.

He added that there were also possible organisational savings to be made by better integration of health and social care.

Royal Berkshire Foundation Trust acting chief medical officer Jonathan Fielden, speaking in a personal capacity, said bureaucracy did sometimes “get in the way” of clinicians delivering care.

There were layers of hierarchy that existed primarily “to tell the next level up to tell the next level up to keep the minister happy”, he told HSJ.

Traditional barriers between primary and secondary care would need to be broken down for the administration-cutting initiative to be successful, he said.

Primary Care Trust Network director David Stout acknowledged that the amount spent by PCTs had increased recently.

“To a large extent it’s driven by growing duties, responsibilities and expectations,” he said. But it was reasonable to ensure “every penny we spend on management is used effectively”.

But Mr Stout said that decisions over what PCTs should do less of would be dictated by the detail of Conservative health policy.

Conservative estimates

  • £4.4bn - Overall cost of NHS bureaucracy
  • £2.1bn - Annual PCT running costs
  • £100m - Annual SHA running costs

NHS admin must be slashed by £1.5bn