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NHS will face a funding crisis next year because of flat funds and rising costs

BMJ 2010; 341 doi: http://dx.doi.org/10.1136/bmj.c6101 (Published 28 October 2010) Cite this as: BMJ 2010;341:c6101
  1. Nigel Hawkes
  1. 1London

The NHS will face a funding crisis by November 2011 unless it acts swiftly, a leading health policy expert has warned.

Nick Bosanquet of Imperial College, London, told a seminar on 27 October that “a gathering storm” of events could find trusts without funds this time next year. The flat funding settlement announced by the chancellor would combine with rising costs—such as bills for private finance initiative hospitals coming through, rising patient demand, and the costs of creating new posts as the numbers of new medical graduates rise—to provoke a crisis.

Similar events had happened before, he said, when periods of rising funding came to an abrupt end, citing 1950-51, 1966-67, 1976-77 and 1987-88. “If the NHS were a very flexible system, it would be OK,” he said. “But the NHS is not very flexible.”

Although previous funding crises had been managed by cutting capital spending, this time round he advised trust chief executives to be realistic about funding, to cut costs in the first quarter of next year and to build up a bigger reserve. “Don’t wait for something to turn up—it won’t,” he said.

Paul Corrigan, who was an adviser on health policy at No 10 Downing Street for Tony Blair, did not disagree. “How would this look to the rest of the country, which is being savagely cut?” he asked. “The cabinet has said it is going to ring-fence health spending. If in spite of that the NHS falls over, the government and the country will go potty. It’ll be a very big political issue. Are we going to say that £100bn (€112bn; $156bn) a year isn’t enough to run a health service?”

They were speaking at a seminar in London organised by Policy Review TV and chaired by the NHS commentator Roy Lilley. Part of a series on public policy, it was filmed so that it could be watched online, or downloaded later as a video or a podcast. (Register at www.policyreview.tv/pages/register.html?straight=1, then watch at the video link http://beta.policyreview.tv/conference/506.html).

Another panellist was Howard Catton, head of policy at the Royal College of Nursing, who said the pain had already begun. Board papers scanned by the college indicated that 10 000 nurses’ jobs had already gone, and many vacancies were being left open. Anita Charlesworth, chief economist at the Nuffield Trust, blamed the failure to raise productivity for the problems ahead. “The NHS has got better and increased output, but not as fast as the growing inputs,” she said. “The key is to catch up that productivity. It can be done, but can it be done fast enough?”

Panellists were divided over the coalition government’s plans to put commissioning in the hands of GPs. Professor Bosanquet said that the soon to-be abolished primary care trusts (PCTs) should be used as “development agencies” for nurturing the commissioning consortia, and that existing PCT boundaries should be retained. Without that, he said, there would be no basis for comparing costs and budgetary control would become much harder.

“PCTs are doing an essential job. It’s unrealistic to think that GP commissioners can start spending money without drawing on PCTs’ experience.”

He said that the private sector had a role to play in raising productivity, and in reducing huge variations in the quality of care. “What we need is constant pressure from patients to be treated in centres where they are getting good results.”

He warned that the NHS had “lost any sense of the value of money”, contrasting this with social care, where a mixed economy of private and public providers got better value. Professor Corrigan disagreed, saying that the NHS and local government had not done very well in creating a market in social care.

The chancellor’s settlement provided £1bn of NHS money to be transferred to social care, Professor Corrigan added. But the Department of Communities and Local Government, which faced much bigger cuts than the NHS, had decided to make it easier for local authorities to spread the burden by refusing to ring fence any of the money it distributed.

This had resulted in the Department of Health refusing to pass on the £1bn to the Department of Communities and Local Government because it couldn’t be sure that local authorities would spend it on social care. The Department of Health therefore hung on to the money and plans to spend it themselves on social care, even though they lack expertise in the area. “That’s a bit of a mess” he remarked.

Ms Charlesworth welcomed the introduction of clinical staff into management which GP commissioning would bring, but Mr Catton added nurses should be involved as well as doctors. And despite the many criticisms heard of the Government’s plans, a majority of the panel expressed optimism about the future. The exception was Mr Catton, who said: “If it ain’t broke . . .”

Notes

Cite this as: BMJ 2010;341:c6101