15 October 2004
Seamus Ward reports from the CIPFA Health Finance Conference in York between October 7–8
The NHS is about to hear some home truths. Although its annual funding increases will dwarf those of other big-spending government departments until 2008, more frugal days are ahead.
After that year, increases are likely to be considerably lower and in the run-up to 2008, the NHS must prove its efficiency by releasing cash to reinvest in services.
That was the clear message to delegates at the CIPFA Health Finance Conference in York last week: a message led by NHS England finance director Richard Douglas.
'We must find better ways of delivering value for money,' he said. 'One thing is absolutely certain – the significant growth in resources will not carry on forever. As we start to look beyond 2007/08, we can't expect to get 9.5% to 10% cash increases. We are more likely to get the sort of numbers we were used to in the past.
'But now we have the opportunity to start levering change from that money.'
In a candid speech, he insisted that hitting the Gershon review savings target of £6.5bn by 2007/08 was a key element in making those changes.
'We worked very closely with the Gershon team and I must point out the savings were not imposed from on high without consultation. This is something that will build on the work we have already been trying to do.'
Douglas' comments were echoed by Niall Dickson, the chief executive of the King's Fund, who said the recent rises in NHS spending were unsustainable. The health service must be seen to be getting value for taxpayers' money, he said.
'I have yet to meet a politician who thinks the current rate of growth will continue beyond 2008. They are not talking about it at the moment in public, though they will in private. It will be like education in the 1970s, which had a high rate of growth that reduced to modest growth.
'You are talking about more money but not as much as now and that will look like cuts come 2008. Success or failure depends on how the health service manages its resources over the next few years. '
Taking up the theme, Andy McKeon, managing director for health at the Audit Commission, told the conference that staff being used more productively would account for £4bn of the £6.5bn savings target.
However, new staff contracts had increased salaries.
'If NHS pay is showing a 7% to 8% increase and the rest of the public sector 3% to 4%, what are we getting for the extra investment in NHS pay?' he asked.
Douglas cited getting best value from resources as one of four main themes facing NHS finance. The others were: building the new financial systems to support the reformed health service; developing the skills of finance staff; and establishing a sustainable financial base.
On the final point, he was particularly concerned about putting NHS finances on an even keel. There were still too many short-term fixes as money was moved around the health service in order to bail out organisations that had run up deficits.
'There seem to be a number of organisations that view living within their resources as optional. We have got to get that mind set out of the system. Organisations that fail financially fail full stop.'
He would concentrate on turning round the financial position of this hard core. Action was needed, as the organisations' positions would be difficult under the new payment by results regime and the introduction of foundation trusts.
'I have started working with strategic health authority finance directors on how to deal with the “hard cases” in the system. It's probably a handful that are deep in the mire but we will help them find a way out,' he added.
He went on to say that many trusts will protest that the financial problems are too deep-seated and complex to simply 'manage out', NHS modernisation is costing more than initially thought and public expectation is so high that efficiencies will be portrayed as cuts.
They believe they have a choice between delivering the government's agenda or remaining in the black, Douglas said. However, he saw this as a false argument. The NHS has heard the home truths, he said. Now, it faces a period of tough love.