Noel Plumridge: checking up on the Nicholson challenge

Forty per cent of the savings are to come from provider efficiencies driven by the tariff, or, in NHS jargon, cost improvement programmes.

NHS chief executive Sir David Nicholson himself explained this to a sceptical public accounts committee in January. He referred to an efficiency gain of 4 per cent already built into the 2011 tariff – an allusion to various adjustments and rule changes that have eaten into hospital income this year.

Service change is expected to yield a further 20 per cent. Here a £4bn saving looks optimistic.

It’s still not entirely clear what “service change” encompasses. Technology-led improvement certainly comes into it, as does more care outside hospital, no doubt.

Process re-engineering still offers much scope, but it is a tool that is already extensively used.

However, the costs in primary care are real while the savings at the hospital are harder to realise. And if commissioner curbs on “low value” procedures are also included, can they be sustained as GPs take responsibility?

The final 40 per cent is to be found from so-called “input costs”: NHS costs where the level is controlled centrally.

In January Sir David listed the pay freeze, “significant reductions” to management costs, and the DH’s own budget as the route to another £8bn. Delivery would be Richmond House’s responsibility, even if NHS chief executives would need to cope with the fallout.

Eight months on, however, some of these headings also appear a little flaky.

Have system-wide assumptions on superstructure costs been banjaxed by delays and amendments to Lansley’s Health and Social Care Bill? Do a 4.5 per cent inflation rate and a threat of strikes this winter change, in any way, previous assumptions on NHS pay? According to NHS Employers, the cost of employment, driven upwards by salary increments, is actually missing by over 2 per cent.

In short, how reliable is the DH contribution to Sir David Nicholson’s challenge?