Editorials

A generous birthday present to the NHS

But spending it wisely may be difficult

News p 231

New Labour has paid its tribute to the one symbol of Old Labour's achievements that has stood the test of time. The British government's 50th birthday present to the National Health Service has, at £21bn over the next three years, turned out to be even more generous than expected. It implies an annual growth of 4.7% in the NHS's budget, well above the rate conventionally assumed to be necessary to accommodate demographic pressures and technological change.¹ Whatever the doubts about the precise significance of the figures announced by the chancellor of the exchequer, and whatever the reservations about how the money is to be spent, this represents morale boosting reassurance that the government's commitment to the NHS is more than rhetorical.

The planned 4.7% growth rate in real terms depends on one key assumption. This is that the rise in the costs of the inputs to the NHSin particular, salarieswill not exceed 2.5% a year. This is unrealistic. The gap between pay in the public and private sectors has been widening. To the extent that salaries in the NHS are brought into line with the rest of the economy, so there will be less scope for translating the extra funds into extra resources. Only consider the case of nurses, who account for almost half the NHS's total salary bill. If the government is to succeed in its intention of recruiting 15 000 more nurses, it may well have to offer better salaries and to change the pay structure to offer stronger incentives to stay in the profession.

But why does the NHS need an extra 15 000 nurses? Or, come to that, another 7000 doctors? These are the targets sets by Frank Dobson, the secretary of state for health, in his House of Commons statement on health expenditure. But it is far from clear why these particular figures have been chosen. Why not 10 000 (or 20 000) nurses and 5000 (or 10 000) doctors? Are these figures more than extrapolations of existing trends? If so, what is their rationale? And where will the extra bodies come from? The expansion in training places for nurses and doctors will certainly not graduate the extra staff in time to meet Mr Dobson's targets for the next three years.

Such questions prompt a larger worry. This is that the extra funds will be used to achieve headline catching targets rather than to pursue a coherent strategy for the NHS. This worry is compounded by another feature of the new expenditure strategy. This is the emphasis on making increasing expenditure contingent on the achievement of specific objectives, a process of "continuous scrutiny and audit" to be monitored by a cabinet committee.² In principle this is eminently sensible: there is little point in pouring extra funds into the NHS (or education) if the investment does not yield an improved performance. However, everything depends on how the performance is to be measured. If the wrong benchmarks are chosen, the result may be to offer perverse incentives to increase activity without necessarily improving outcomes.

This risk is all the greater given that activity is easier to measure than outcomes. So, for example, Mr Dobson's targets include an increase of 3 million in the number of patients treated in NHS hospitals and a reduction in waiting lists. It is not self evident that the NHS's performance should be judged by the number of patients being processed through hospitals: the number of patients successfully treated outside hospitals, or illnesses prevented, might be a better indicator. Nor is it self evident that a reduction in waiting lists, rather than in waiting times for urgent conditions demanding speedy treatment, should have high priority. The Department of Health has published a range of possible indicators ^{3 4} designed to capture the various dimensions of performance, including quality, but it remains to be seen how these will be used. Indicators are welcome in so far as they give visibility to what the NHS is doing but, given the problems of interpreting them, potentially dangerous as tools of central control.

Yet greater central control is the price that the NHS will have to pay for the extra funds. Thus the £5bn modernisation fund, included in the birthday present, will presumably be distributed by the centre. In this the expenditure review reinforces the centralising thrust of the 1997 white paper.⁵ It is far from obvious that the NHS Executive has the managerial capacity to take on this extra burden. Nor is it clear that ministers have thought through the implications of such a centralising strategy. For even with the extra £21bn the NHS will still be allocating scarce resources between competing demands: ministers will not change the reality of rationing by expunging it from their vocabulary. And the greater the degree of centralisation, the more difficult will it be for ministers to absolve themselves from responsibility.