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 NHS—in particular, salaries—will not exceed 2.5% a year. This is unrealistic. The …