Revised DH figures predict 8,000 fewer redundancies from NHS reforms

The revised Health Bill impact assessment, published yesterday afternoon, says the gross savings created by the reforms between 2010-11 and 2014-15 will be £4.5bn, instead of the £5.2bn figure published in January’s impact assessment.

This is because the DH has decided to make the changes more slowly and the fact that administrative spending - defined as the cost of non “frontline” functions in the DH, strategic health authorities, primary care trusts and arm’s length bodies - was found to be £600m lower than was estimated by the DH in January.

Administration spending in 2010-11 is now believed to have been £4.5bn instead of £5.1bn as before, equivalent to 48,300 staff instead of 64,200.

The earlier figures were found to inaccurately include public health staff and did not take into account the higher pay received by PCT commissioning staff compared with those in provider wings.

The over-estimation is also because the NHS “went further and faster with reductions in staff numbers [in 2010-11] than was anticipated,” the impact assessment states.

Overall, 12,900 redundancies are expected to have been made by 2014-15 among those working in PCTs, SHAs, arm’s length bodies and the DH – 8,000 fewer than predicted in January.

This is partly because there are fewer administrative staff than previously thought and partly because redundancies will be staggered more slowly between now and 2014-15, allowing for more natural wastage.

Whereas in January, when the DH planned to make 73 per cent of the administrative cuts by 2012-13, this has been reduced to 59 per cent.  Nearly 10 per cent of the reduction will now be made in 2013-14, the final year of cuts.

Despite the re-calculation, the DH is sticking to its original aim to cut administration spending by a third by 2014-15.

This means that the overall cut will be lower - £1.5bn rather than £1.7bn.

But it will also result in the level of administrative spending in 2014-15 being even lower than was previously planned - £3bn instead of £3.4bn.

The document states: “While this [the re-calculated baseline] does reduce the annual saving, it does also mean that less money is being spent on adminstration across the system than was originally envisaged. This also means that any future adminstrative spending will be lower than previously estimated, and more of the money for the NHS will be spent on frontline care.”

The costs of the reforms have been reduced from £1.4bn  to between £1.2bn and £1.3bn, due to lower redundancy costs.