Cutting the NHS makes sense

For months Whitehall has been bracing itself for the coalition’s second spending review. Cabinet ministers and civil servants have been earnestly lobbying the Treasury to withhold the axe of further cuts. One department that will definitely be spared will be the NHS, despite being one of the few “ring fenced” services that has seen spending increase since 2010. Economists (and jealous ministers) have been pushing the Prime Minister hard to review his pre-election commitment to protect the NHS and cut spending to help control the deficit.

With the public finances still in a parlous state, reducing health spending (the largest departmental budget), makes eminent economic sense. However the Health Secretary has so far beaten away those who would cut his £110bn budget by citing the cost pressures facing the service, the so-called “Nicholson challenge” to achieve £20bn in productivity savings. Because of rising demand for healthcare, driven in part by an ageing population and more complex chronic illnesses, it is argued that the NHS should be made a special case.

However, the decision to ring-fence the NHS budget is turning out to have unexpected consequences. Alongside their commitment to continue to increase spending Health ministers wanted to radically reform services. The previous Secretary of State argued that to deliver value for money and higher quality, more care would need to be delivered in the community. Bed numbers would need to fall to release resources into new services such as walk-in-centres and better primary care. The workforce would become smaller and more flexible. The government called for greater competition and new providers to encourage much needed innovation

This much needed modernisation would ensure that the NHS could continue to provide high-quality care for all. However, ministers will be disappointed by the progress that has been made since the election. As Reform has shown, the proportion of spending on general and acute services has remained unchanged. The proportion of patients using alternatives to A&E has started to slow down and the growth in the private sector and charitable providers has stalled. While nearly 6,000 hospital beds have closed since 2010, there has been no accompanying increase in the pace of change. Due to the lack of reform there has been growing pressure on hospital beds and A&E departments and waiting times for emergency care have risen.

Ministers have been right to call for reform, but ring-fencing the health budget has been a Pyrrhic victory. Protecting the NHS budget has meant that the service itself has felt protected from the need to change. Rather than increasing spending to keep a lid on the cost pressures, spending reductions would spur the positive change that ministers want to see. This has already happened in those services which saw their budgets cut in the first spending review, such as policing and criminal justice. As Theresa May has recently argued, “you can reduce spending and still improve services…in fact, it is often the need to make savings that drive innovation and change for the better.”

Flat-lining: Lack of progress in NHS reform is available here