The NHS sounds a warning for public services

A year into the Coalition’s term and the NHS is already starting to wobble. Its performance against key measures like waiting times has fallen and in April the King’s Fund warned that the service is unlikely to meet its 2011-12 productivity targets. The speed at which the NHS performance has plummeted is all the more surprising given that its budgets are supposed to be ring-fenced. The Guardian’s Sarah Boseley calls it “The great NHS funding mystery.

As she says, adding an expensive and disruptive re-organisation to the other challenges faced by the NHS doesn’t help but the underlying cause of the problem is that NHS costs are running well ahead of inflation. The demographic pressures that we have known about for years are starting to take effect.

But how can a solemn undertaking to give the NHS more money translate into delays and cuts? The answer lies, in part, in the growing numbers of us who, like Bill, have every expectation of living long into retirement and every hope that the NHS will sort out our infirmities. Average life expectancy in the UK rose from 71 in 1960 to over 80 in 2009. Demographic change is adding £1bn a year to NHS costs, the influential health thinktank the King’s Fund says.

The same pressures will, to an extent, increase the cost of all public services and the level of spending on welfare too.

The challenge we face is stark. If the government left the public services as they were in 2009 and gave them an inflation linked increase every year, eventually they would collapse. Their underlying costs are increasing faster than inflation, meaning that 2009 spending levels will not buy the same standard of public services by 2019. Having studied these trends, politically non-aligned organisations like the 2020 Public Services Trust, the National Institute of Economic and Social Research and the Institute for Fiscal Studies (in its Green Budget) have reached similar conclusions. Governments will either have to increase taxes, borrow more or cut the cost of public services. Both NIESR and the IFS warn that, by the early part of the next decade, there will need to be more cuts, on top of those already proposed by the government.

The political agendas of both parties have caused the UK’s fiscal problems and the necessity for public sector reform to become conflated. They are linked, of course. The UK’s public debt and low levels of growth will leave future governments with even less room to manoeuvre. However, it was always going to be necessary to reduce the cost of public services at some point. That would have been the case even if we had not had a severe recession.

The rapid drop in NHS perfromance over the past year offers a glimpse of the future. Even with a funding increase roughly in line with inflation, it is struggling to cope. All public services face a similar challenge. By the end of this decade we won’t be able to the public services we have been used to for the amount we have been used to spending on them. Something has got to give and, as ever-increasing debt is unsustainable and the British don’t like high taxes, that something will be public service budgets.

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8 Responses to The NHS sounds a warning for public services

  1. Pingback: The NHS sounds a warning for public services - Rick - Member Blogs - HR Blogs - HR Space from Personnel Today and Xpert HR

  2. I have some misgivings. You mention “NHS performance” which I assume you mean productivity. The “product” of the NHS is *health*, it is not just the number of treatments performed every year (though that does make up part of the outputs). The current government’s insistence that there are 4% productivity gains for the next 5 years are finance driven (do more for less) rather than driven by improving the “product” (the health of the nation). That is no way to run a healthcare system. Think about it. If I had a magic pill that would improve everyone’s health, but would add £10bn to the cost of the NHS (yeah, it really is magical if there is a productivity gain for that rise in inputs), would this government buy it? Even if it raised NHS productivity by 10% would they buy it? The answer is an emphatic no: they are only interested in cutting costs.

    There are serious worries that NHS quality will decline. Waiting lists are the main manifestation, but there are worries that long term outcomes through the appalling mismanagement of public health (resulting in fewer people giving up smoking, fewer people getting advice on sexual health and drug use) will decline and we will only see those productivity declines years after this government has been forgotten. The nation’s health is at risk.

    The problem is that in the future when ONS say that there has been yet another drop in productivity, the right wing will ignore that this is due to a decline in quality and will demand more cost cutting and do this by cutting income. That will lead to a death spiral, where more cuts to costs will lead to further declines in productivity.

    • Rick says:

      Richard, I was talking about the performance against the targets. This will inevitably decline if the NHS has a real-tems freeze and no productivity improvements because the volume of work increases every year.

      Like you, I’m sceptical about ‘more for less’. The best we can hope for is a bit less for a lot less. The worst is a hell of a lot less for a lot less – i.e. the NHS cuts costs and becomes less efficient. I worry that the Lansley reforms may do just that!

  3. Jim says:

    @Richard Blogger: are you suggesting a magical pill that in itself costs £10bn (but would have lots of savings attached because people would need less of other treatments) or a net cost to the NHS of £10bn, even after taking any savings into account?

    I suggest any government would be interested in the former, as it could reduce overall costs, whereas the latter is already available – there are lots of treatments/drugs that would improve the overall health of the nation, but at high cost.

    Or are you saying that ANY improvement in public health is worth ANY increase in costs?

  4. Strategist says:

    >>>”Something has got to give and, as ever-increasing debt is unsustainable and the British don’t like high taxes, that something will be public service budgets.”

    You’re barking up the wrong tree. From: “The wages of middle income Britain have grown by an average of just 56% since 1978, despite GDP increasing by 108% over the same period.”
    Find that missing money, and you’ll solve the problem.

  5. Prateek Buch says:

    Interesting post, but I’d question the premise that an ageing population necessarily means higher healthcare costs.
    An extensive study by senior health economists on behalf of the World Health Organisation calls into question the commonly-held view that an older population is ipso facto more expensive to keep healthy.
    Their data suggest that there will indeed be growing pressure on the diminishing working-age population to fund the health service, but that utilisation of healthcare services doesn’t necessarily have to increase when a population gets older. This is largely because an older population generally needs more palliative care than acute medicine. They argue that by driving down utilisation – i.e. promoting healthier living, shifting care away from the fire-fighting of acute hospital admissions to more preventive medicine – the costs associated with an older populace can be offset.
    What’s missing in the whole NHS reform debate is that if rising costs are the problem, then focussing on the supply-side of healthcare (as Lansley’s reforms do) can only take us so far – the real cost savings are to be made by making everyone healthier, preventing them from falling ill as often as they do. Nothing in the reforms indicate this will be achieved – it’s classic Tory supply-side theory frankly, and it won’t wash…

  6. Rick says:

    Thanks for this Prateek. As you say, investing in reducing demands on public services as a way of reducing cost is rare but, in some cases, it seems to yield results.

    Merseyside Fire Service cut their costs by, literally, preventing the need for fire-fighting. They invested in education and fire prevention which reduced the demand for the service and hence the costs.

    The Audit Commission report is here:

    Trouble is, it took up front investment and time, as will any radical overhaul of public service provision. My argument all along has been that we need to reform the way we deliver public services but that, to do this properly, will require thought and investment. Both seem to be in short supply at the moment.

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