NHS Efficiency Target: Confusion Reigns

Confusion reigns in government over what the efficiency targets are for the NHS.

To recap: in the Budget (para 6.14) it says that by 2013-14 the health service will be making annual efficiency savings of between £15bn and £20bn – that is roughly 15% to 20% of their entire spending.

Just before a hearing of the Treasury Select Committee on Monday (29th March) I talked to Robert Chote, head of the IFS and a fellow witness to the committee. We agreed this had to be an error and the £15-£20bn must be a cumulative figure over the next four years.

Nevetheless I thought it would be a good idea to raise it with the Treasury Committee, as if it was a mistake it was a whopper. And if it wasn’t, it was an even bigger story – the government claiming it could make 4-5% a year efficiency gains in an NHS that has seen its productivity decline over recent years according to the Office of National Statistics. I also put this issue on this blog, and NHS officials started contacting me to say it was a mistake – it was cumulative not an annual figure.

On Wednesday I contacted the Department of Health and was told that it was indeed a cumulative figure, which makes more sense (even if as a cumulative figure it is still hard to stack up – just not as hard as 15-20% annual efficiency savings across the NHS in four years time).

What I didn’t know was that members of the Treasury Select Committee had tried to get out of the Chancellor what exactly para 6.14 meant on Tuesday.  The Chancellor robustly defended the ‘annual £15-20bn savings’ statement in the Budget.

For example:

Mr Tyrie: These savings in the Health Service are £15 billion to £20 billion annually.  Do you really think that is something the electorate will find plausible?

Mr Darling:  Yes.  The NHS has a budget of about £100 billion and I do not think it is unreasonable to put very demanding targets on it.

And later in the evidence session:

Mr Brady:  Chancellor, just to come back to you and your initial response, we had some confusion with officials yesterday as to whether this £15-20 billion was an annual figure that would be achieved recurrently.

Mr Darling: We get there over a period, but it is an annual figure.

Mr Brady:  So from 2013/14 you are expecting that £15-20 billion to be achieved each and every year?

Mr Darling: That is right.

So there you have it – the Chancellor really does expect the NHS to save between 15-20% of its budget every year by 2013-14. Admittedly, he went on to say that most of this would be recycled into ‘front-line services’ and it was not a cut in the NHS budget of £15-£20bn – but even so this is an astonishing target if true.

The DoH and NHS officials I’ve spoken to beg to differ and maintain its an annual target of about £3-5bn, cumulating to £15-£20bn savings over four years. Who is right? It’s surely time someone at DoH cleared this up definitely one way or the other?

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