By Tash Shifrin
4 March 2010
The government and Opposition both claim the NHS will be safe in their hands. But just how protected will health budgets really be as the spending squeeze tightens? Tash Shifrin reports on threats of cuts and closures across England
The ghosts of general elections past are hovering around the NHS as a new polling day looms.
In 1983, former Conservative prime minister Margaret Thatcher’s claim that the NHS was ‘safe in our hands’ stole the headlines. In 1992, it was the ‘battle of Jennifer’s ear’ – claims and counter-claims over a young girl’s wait for an operation. And in 2001, the voters of Wyre Forest threw out Labour minister David Lock in protest over government plans to close a local accident & emergency department. The seat went to local hospital doctor and campaigner Richard Taylor, who stood on a Kidderminster Hospital Health Concern ticket. Now, against a backdrop of economic crisis and soaring public borrowing figures, the NHS looks set to become a battleground again. And this time, cuts and closures could become the focus of public and political attention.
The government and Opposition have already engaged in a little early positioning. In their row over how best – and how fast – to bring down the public deficit, both main parties have stressed that the health service will not bear the brunt of their plans for a spending squeeze.
Conservative leader David Cameron has pledged not to cut NHS funding if his party is returned to power. And Chancellor Alistair Darling’s December Pre-Budget Report announced that funding for 2010/11 would continue to rise by an average 5% across England.
His pronouncement on future funding was more cautious, outlining plans only for the following two years, when funding for the ‘95% of the NHS’ that made up its frontline services would be ‘protected’ from the public sector cuts.
‘Even in this much tighter financial environment, we are determined to protect frontline services and sustain the improvements that have been delivered over the past decade,’ he told the Commons.
But the chancellor also emphasised the huge efficiency savings required of the health service, raised by NHS chief executive David Nicholson earlier last year. Savings of £10bn will be expected by 2012/13, as an interim milestone towards the target of £15bn–£20bn – around 20% of the current NHS budget – by 2013/14, he announced.
The idea, outlined further in the 2010/11 NHS Operating Framework and a health service white paper following the PBR, is that the NHS should use its growth money this year to prepare for the lean years ahead. This ‘increase now, squeeze later’ model fits with the government’s wider aim of maintaining public spending in the short term to protect the still weak economic recovery. It also appeared to hold off the political hazard of cuts and closures in the NHS until after the election.
But the storm has broken early. At University Hospitals of Leicester NHS Trust, 700 jobs will be shed over the next year, through a vacancy freeze already in place. At the Royal Free hospital in London, another 180 jobs are going.
And, in an announcement that raised the spectre of wholesale 1980s-style closures, Gloucestershire Hospitals NHS Foundation Trust said up to 200 of its 1,128 inpatient beds are to be shut, with four wards to close next month.
This is a scenario the government is desperate to avoid. Health minister Mike O’Brien tells Public Finance: ‘The NHS budget is in a strong position after a decade of record investment and will increase by 11.3% up to April 2011, as set out in the latest Spending Review.
‘That increase will be locked in for the next two years. There is no justification for cuts in any services. I will name and shame those who make 1980s-style cuts.
‘We want to find £15bn–£20bn by delivering care more efficiently, while making sure that we continue to deliver better services across the NHS.’
But Unison policy officer Guy Collis says the cuts are already upon us. ‘There’s no doubt we’re beginning to see some of these threats to jobs coming through.’
The rising political temperature was illustrated last week, when thousands of demonstrators – including former health secretary Frank Dobson – took to the streets to protest against the threatened closure of Whittington Hospital’s A&E unit. The department is thought to be at risk from a major reorganisation of health care across the capital. The plans involve closing or downgrading 13 hospitals, according to John Lister, director of the London Health Emergency campaign and author of a report for the British Medical Association, London’s NHS: on the brink.
What happened to the last year of largesse, the cushioned approach to the spending squeeze announced by Darling in his PBR?
Sue Slipman, director of the Foundation Trust Network, says: ‘The money is in the system, but it isn’t in the acute sector or the secondary sector as a whole. It’s in the strategic health authorities – about 5% – to support reconfiguration.’
And acute trusts are feeling an instant pinch. Slipman cites the new NHS treatments tariff – the prices primary care trusts pay hospitals. This has been frozen at 2009/10 prices for 2010/11 – a squeezing measure described by the DoH as a ‘zero percent uplift’.
The vice has been further tightened with a new ‘marginal rate’ of just 30% of tariff prices for unplanned hospital activity above a baseline pegged to 2008/09 activity levels. This is winding the clock back to before last year’s growth, Slipman points out. The aim is to force the NHS to restrict demand for operations, by making unplanned activity a serious loss-maker.
Slipman says the cumulative effect of the various measures in the complex tariff will mean some trusts losing up to 7% of their income.
She adds: ‘We’re concerned about how much risk you can put on providers before they topple over.’
The effect is ‘biting’ this year, Slipman says, with inflation, pay costs and increased demand from an ageing population.
At Leicester, chief executive Malcolm Lowe-Lauri has identified the need for £58.5m savings in 2010/11 – ‘a sizeable figure to find’. It includes an estimated £24.4m in inflation costs, £9.9m of planned developments, £6m of additional demand for services and £5.9m to cover rising drug costs. At Gloucestershire, the trust also said that its threatened ward and bed closures were ‘an important part’ of saving £27m–£30m in 2010/11.
Elsewhere, one senior manager told Public Finance of other controversial measures under discussion. ‘There’s a list circulating of procedures that won’t be funded. There’s always been a list and the list is growing. It’s going to be some form of rationing,’ he says. He cites one area where new thresholds for access to services are under discussion. Now, patients qualify for hip operations if their level of disability is above 35 on the specialist Oxford Hip Score. ‘The PCT is talking about raising that to 40.’
Other ideas under discussion include barring patients who have smoked within the past month from operations requiring general anaesthetic – a proposal the manager suggests will not make it as far as public consultation.
A Foundation Trust Network paper, leaked to the press earlier this year, revealed that foundation trusts could not guarantee to prevent redundancies and were seeking curbs on pay.
Collis says Unison is ready to explore Health Secretary Andy Burnham’s idea for some trade-off between pay and jobs. But this ‘might be tricky’ given the foundations’ stance and their largely autonomous status, he adds.
The problem is, the sums required in efficiency savings are huge, as is the impact of holding down NHS funding when costs are rising. Carl Emmerson, deputy director of the Institute for Fiscal Studies, puts the chancellor’s measures into a historical context. The last time the NHS budget was cut in real terms was 1977/78, he says.
Emmerson adds that the two-year spending freeze on 95% of the NHS from 2011/12 will be ‘the first time there’s been no increase in 30 years and the tightest two-year settlement in 60 years’.
At the King’s Fund, chief economist John Appleby also points to the unknown fate of ‘the other 5%’ of the NHS. ‘The worst-case scenario is that the other 5% might not be funded at all. That’s a cash cut of 5% and a real-terms cut of more than that. The NHS budget could go down overall.’
Appleby suggests some trusts will be able to reduce costs through higher productivity, by increasing day-cases and surgical workloads to bring down cost per case. But some hospitals already have higher costs than the tariff price and will struggle as inflation outstrips the non-existent tariff uplift.
Selling off land, dipping into surpluses – which totalled £269m among foundation trusts in 2008/09 – and cross-subsidising loss-making services are all possibilities, Appleby suggests. But he adds: ‘The other option is people will be sacked in hospitals.’
He is sceptical about whether the £20bn target can be met, however. ‘That’s a 5% or 6% productivity improvement year on year for three years... given that the NHS has made a negative improvement over the past ten years.’
Chris Calkin, spokesman for the Healthcare Financial Management Association and finance director at University Hospital of North Staffordshire NHS Trust, also casts doubt on the target.
‘We do genuinely believe there is scope for more efficiency,’ he says. ‘Whether there is 15%–20% of scope I personally doubt, but there’s a lot we can and should be doing.’
Calkin says lowering costs while maintaining access and quality will mean ‘getting into clinical practice in GP-land as well as acute trusts’ and looking at how services are provided. He adds a warning note, however: ‘My feeling is we’re not going to provide the full range of services we used to.’
It is the reshaping of clinical services that the government is now pushing with renewed zeal. While previous drives to shift care from acute hospitals to community settings have been flagged as ‘bringing care closer to patients’, now this is linked explicitly in DoH documents to improved productivity and efficiency.
As Primary Care Network director David Stout says, the landscape has changed since the financial squeezes of earlier times. Although the NHS is starting from a higher funding base these days, public expectations are higher too – ‘the old way of running up waiting lists just isn’t viable any more’.
But a massive transfer of hospital activity to new settings – ‘taking out’ about 30%, according to Slipman’s rule of thumb – could ignite public feeling.
A war of words has already broken out in London, where the SHA says there are no plans to close any hospitals, although many services will move to more than 100 proposed ‘polyclinics’.
A spokesman emphasises that the London-wide scheme is still at the consultation stage and says the concerns over Whittington’s A&E are ‘speculation’. Only two A&E closures have so far been confirmed: at Chase Farm in Enfield and Queen Mary’s Hospital in Sidcup, he says. Closure plans at King George’s in east London are being consulted on.
But Lister believes forewarned is forearmed. He cites the scale of the efficiency savings being demanded in some parts of London, such as 37% of the budget at Barking, Havering & Redbridge University Hospitals Trust, and 35% at Barts & the Royal London. Most of the polyclinics have yet to be built and are untested on such a scale, he says. ‘It’s madness.’
At the SHA, the spokesman says the plans have long been in the pipeline. But London’s slice of the £20bn efficiency target, and an expected shortfall of £3.3bn–£5bn by 2017 ‘means we’ve got to implement our changes more quickly than perhaps we would have done’.
The Gloucestershire trust has already felt the backlash as the county council responded to its ward closures with a unanimous call to halt the programme. After a tense week, the local PCT put out a three-page statement, promising an impact review and a report to the council’s overview and scrutiny committee in March.
Lister expects political pressure over NHS funding to ratchet up as the election approaches – councillors and MPs ‘who are seen to connive with closures will pay an electoral price’, he believes. But after the election, all bets are off, he warns. ‘The cuts start the day after the polls close.’
4 March 2010
The government and Opposition both claim the NHS will be safe in their hands. But just how protected will health budgets really be as the spending squeeze tightens? Tash Shifrin reports on threats of cuts and closures across England
The ghosts of general elections past are hovering around the NHS as a new polling day looms.
In 1983, former Conservative prime minister Margaret Thatcher’s claim that the NHS was ‘safe in our hands’ stole the headlines. In 1992, it was the ‘battle of Jennifer’s ear’ – claims and counter-claims over a young girl’s wait for an operation. And in 2001, the voters of Wyre Forest threw out Labour minister David Lock in protest over government plans to close a local accident & emergency department. The seat went to local hospital doctor and campaigner Richard Taylor, who stood on a Kidderminster Hospital Health Concern ticket. Now, against a backdrop of economic crisis and soaring public borrowing figures, the NHS looks set to become a battleground again. And this time, cuts and closures could become the focus of public and political attention.
The government and Opposition have already engaged in a little early positioning. In their row over how best – and how fast – to bring down the public deficit, both main parties have stressed that the health service will not bear the brunt of their plans for a spending squeeze.
Conservative leader David Cameron has pledged not to cut NHS funding if his party is returned to power. And Chancellor Alistair Darling’s December Pre-Budget Report announced that funding for 2010/11 would continue to rise by an average 5% across England.
His pronouncement on future funding was more cautious, outlining plans only for the following two years, when funding for the ‘95% of the NHS’ that made up its frontline services would be ‘protected’ from the public sector cuts.
‘Even in this much tighter financial environment, we are determined to protect frontline services and sustain the improvements that have been delivered over the past decade,’ he told the Commons.
But the chancellor also emphasised the huge efficiency savings required of the health service, raised by NHS chief executive David Nicholson earlier last year. Savings of £10bn will be expected by 2012/13, as an interim milestone towards the target of £15bn–£20bn – around 20% of the current NHS budget – by 2013/14, he announced.
The idea, outlined further in the 2010/11 NHS Operating Framework and a health service white paper following the PBR, is that the NHS should use its growth money this year to prepare for the lean years ahead. This ‘increase now, squeeze later’ model fits with the government’s wider aim of maintaining public spending in the short term to protect the still weak economic recovery. It also appeared to hold off the political hazard of cuts and closures in the NHS until after the election.
But the storm has broken early. At University Hospitals of Leicester NHS Trust, 700 jobs will be shed over the next year, through a vacancy freeze already in place. At the Royal Free hospital in London, another 180 jobs are going.
And, in an announcement that raised the spectre of wholesale 1980s-style closures, Gloucestershire Hospitals NHS Foundation Trust said up to 200 of its 1,128 inpatient beds are to be shut, with four wards to close next month.
This is a scenario the government is desperate to avoid. Health minister Mike O’Brien tells Public Finance: ‘The NHS budget is in a strong position after a decade of record investment and will increase by 11.3% up to April 2011, as set out in the latest Spending Review.
‘That increase will be locked in for the next two years. There is no justification for cuts in any services. I will name and shame those who make 1980s-style cuts.
‘We want to find £15bn–£20bn by delivering care more efficiently, while making sure that we continue to deliver better services across the NHS.’
But Unison policy officer Guy Collis says the cuts are already upon us. ‘There’s no doubt we’re beginning to see some of these threats to jobs coming through.’
The rising political temperature was illustrated last week, when thousands of demonstrators – including former health secretary Frank Dobson – took to the streets to protest against the threatened closure of Whittington Hospital’s A&E unit. The department is thought to be at risk from a major reorganisation of health care across the capital. The plans involve closing or downgrading 13 hospitals, according to John Lister, director of the London Health Emergency campaign and author of a report for the British Medical Association, London’s NHS: on the brink.
What happened to the last year of largesse, the cushioned approach to the spending squeeze announced by Darling in his PBR?
Sue Slipman, director of the Foundation Trust Network, says: ‘The money is in the system, but it isn’t in the acute sector or the secondary sector as a whole. It’s in the strategic health authorities – about 5% – to support reconfiguration.’
And acute trusts are feeling an instant pinch. Slipman cites the new NHS treatments tariff – the prices primary care trusts pay hospitals. This has been frozen at 2009/10 prices for 2010/11 – a squeezing measure described by the DoH as a ‘zero percent uplift’.
The vice has been further tightened with a new ‘marginal rate’ of just 30% of tariff prices for unplanned hospital activity above a baseline pegged to 2008/09 activity levels. This is winding the clock back to before last year’s growth, Slipman points out. The aim is to force the NHS to restrict demand for operations, by making unplanned activity a serious loss-maker.
Slipman says the cumulative effect of the various measures in the complex tariff will mean some trusts losing up to 7% of their income.
She adds: ‘We’re concerned about how much risk you can put on providers before they topple over.’
The effect is ‘biting’ this year, Slipman says, with inflation, pay costs and increased demand from an ageing population.
At Leicester, chief executive Malcolm Lowe-Lauri has identified the need for £58.5m savings in 2010/11 – ‘a sizeable figure to find’. It includes an estimated £24.4m in inflation costs, £9.9m of planned developments, £6m of additional demand for services and £5.9m to cover rising drug costs. At Gloucestershire, the trust also said that its threatened ward and bed closures were ‘an important part’ of saving £27m–£30m in 2010/11.
Elsewhere, one senior manager told Public Finance of other controversial measures under discussion. ‘There’s a list circulating of procedures that won’t be funded. There’s always been a list and the list is growing. It’s going to be some form of rationing,’ he says. He cites one area where new thresholds for access to services are under discussion. Now, patients qualify for hip operations if their level of disability is above 35 on the specialist Oxford Hip Score. ‘The PCT is talking about raising that to 40.’
Other ideas under discussion include barring patients who have smoked within the past month from operations requiring general anaesthetic – a proposal the manager suggests will not make it as far as public consultation.
A Foundation Trust Network paper, leaked to the press earlier this year, revealed that foundation trusts could not guarantee to prevent redundancies and were seeking curbs on pay.
Collis says Unison is ready to explore Health Secretary Andy Burnham’s idea for some trade-off between pay and jobs. But this ‘might be tricky’ given the foundations’ stance and their largely autonomous status, he adds.
The problem is, the sums required in efficiency savings are huge, as is the impact of holding down NHS funding when costs are rising. Carl Emmerson, deputy director of the Institute for Fiscal Studies, puts the chancellor’s measures into a historical context. The last time the NHS budget was cut in real terms was 1977/78, he says.
Emmerson adds that the two-year spending freeze on 95% of the NHS from 2011/12 will be ‘the first time there’s been no increase in 30 years and the tightest two-year settlement in 60 years’.
At the King’s Fund, chief economist John Appleby also points to the unknown fate of ‘the other 5%’ of the NHS. ‘The worst-case scenario is that the other 5% might not be funded at all. That’s a cash cut of 5% and a real-terms cut of more than that. The NHS budget could go down overall.’
Appleby suggests some trusts will be able to reduce costs through higher productivity, by increasing day-cases and surgical workloads to bring down cost per case. But some hospitals already have higher costs than the tariff price and will struggle as inflation outstrips the non-existent tariff uplift.
Selling off land, dipping into surpluses – which totalled £269m among foundation trusts in 2008/09 – and cross-subsidising loss-making services are all possibilities, Appleby suggests. But he adds: ‘The other option is people will be sacked in hospitals.’
He is sceptical about whether the £20bn target can be met, however. ‘That’s a 5% or 6% productivity improvement year on year for three years... given that the NHS has made a negative improvement over the past ten years.’
Chris Calkin, spokesman for the Healthcare Financial Management Association and finance director at University Hospital of North Staffordshire NHS Trust, also casts doubt on the target.
‘We do genuinely believe there is scope for more efficiency,’ he says. ‘Whether there is 15%–20% of scope I personally doubt, but there’s a lot we can and should be doing.’
Calkin says lowering costs while maintaining access and quality will mean ‘getting into clinical practice in GP-land as well as acute trusts’ and looking at how services are provided. He adds a warning note, however: ‘My feeling is we’re not going to provide the full range of services we used to.’
It is the reshaping of clinical services that the government is now pushing with renewed zeal. While previous drives to shift care from acute hospitals to community settings have been flagged as ‘bringing care closer to patients’, now this is linked explicitly in DoH documents to improved productivity and efficiency.
As Primary Care Network director David Stout says, the landscape has changed since the financial squeezes of earlier times. Although the NHS is starting from a higher funding base these days, public expectations are higher too – ‘the old way of running up waiting lists just isn’t viable any more’.
But a massive transfer of hospital activity to new settings – ‘taking out’ about 30%, according to Slipman’s rule of thumb – could ignite public feeling.
A war of words has already broken out in London, where the SHA says there are no plans to close any hospitals, although many services will move to more than 100 proposed ‘polyclinics’.
A spokesman emphasises that the London-wide scheme is still at the consultation stage and says the concerns over Whittington’s A&E are ‘speculation’. Only two A&E closures have so far been confirmed: at Chase Farm in Enfield and Queen Mary’s Hospital in Sidcup, he says. Closure plans at King George’s in east London are being consulted on.
But Lister believes forewarned is forearmed. He cites the scale of the efficiency savings being demanded in some parts of London, such as 37% of the budget at Barking, Havering & Redbridge University Hospitals Trust, and 35% at Barts & the Royal London. Most of the polyclinics have yet to be built and are untested on such a scale, he says. ‘It’s madness.’
At the SHA, the spokesman says the plans have long been in the pipeline. But London’s slice of the £20bn efficiency target, and an expected shortfall of £3.3bn–£5bn by 2017 ‘means we’ve got to implement our changes more quickly than perhaps we would have done’.
The Gloucestershire trust has already felt the backlash as the county council responded to its ward closures with a unanimous call to halt the programme. After a tense week, the local PCT put out a three-page statement, promising an impact review and a report to the council’s overview and scrutiny committee in March.
Lister expects political pressure over NHS funding to ratchet up as the election approaches – councillors and MPs ‘who are seen to connive with closures will pay an electoral price’, he believes. But after the election, all bets are off, he warns. ‘The cuts start the day after the polls close.’
