Budget squeeze for National Health Service from 2011

23 April 2009

It looks like the National Health Service could be in for some tight times ahead after Chancellor Alistair Darling said in his Budget that public sector spending will rise by less than 1% from 2011.

The downturn in budget growth will place the NHS under much greater pressure to make savings while dealing with the increasing demands of an ageing and fattening society, which some fear could impact the progress it has achieved in improving services over the last few years.

As the budget increases dry up to around 0.7% a year from 2011, which is even lower than the predicted fall to 1.1%, the Service will have to become more efficient to ensure that it can continue to offer the same level and quality of services, but the heat is on to make substantial savings at the same time that purse strings are being tightened.

“In response to the current economic conditions,” the Department of Health said yesterday it has been set a target by the Chancellor of contributing £2.3 billion in additional savings to the treasury pot, as its revenue budget has been trimmed to £102.3 billion for the Spending Review period 2007/8 to 2010/11.

“As well as providing healthcare and support to those that need it at this crucial time, the NHS is also well placed to help the country through the economic downturn as a major contributor to the overall economy and the country's largest employer,” explained health secretary Alan Johnson.

The savings are to be delivered through a suite of measures, the DH says, such as building on the World Class Commissioning programme to ensure best use of resources, extending and refining the Payment by Results scheme to encourage higher quality and value for money, and introducing new guidance and benchmarking measures to drive efficiency improvements throughout the Service.

The government has promised that, despite the savings drive, money allocated to Primary Care Trusts until 2011 will not be affected, and that the NHS will receive a 5.5% cash boost for front-line services in each of these two years to help it “drive improvements and seek better value for money for the taxpayer”.

But commenting on the budget, Steve Barnett, chief executive of the NHS Confederation, said: “The message for NHS organisations in this budget is clear - the levels of growth seen over recent years are at an end and that despite the relatively strong budget settlement for 2009/10, there are tough times ahead”.

He stressed that NHS leaders will now have to use the next couple of years to prepare for 2010/11 onwards, when the financial outlook is more challenging, and that “if the NHS is to continue to deliver high quality care in an environment with little or no growth and rapidly rising demand even more significant efficiencies will be needed”.