Friday, December 09, 2005


THE National Health Service is not "unravelling", its chief executive insisted yesterday. Despite staff layoffs, mounting deficits and an official policy of delaying operations to save money, Sir Nigel Crisp presented an upbeat report on NHS performance. But, acknowledging the financial squall that the service was facing despite six years of unprecedented cash increases, Sir Nigel admitted that deficits could get bigger if action were not taken now to control them. "When you are introducing change you will inevitably have some degree of turbulence," he said. "The underlying picture here is that 70 per cent of the NHS has got its finances under control. Certain areas need to control finances better."

Last year the NHS finished with a deficit of 250 million pounds, and this year is heading for a 620 million pound shortfall. But by the end of the financial year Sir Nigel expected it to be nearer 200 million. "The most important thing we need to do in the short term is to get to grips with [the deficit] because it could get bigger," he said.

His remarks came after Patricia Hewitt, the Health Secretary, defended the policy adopted by some trusts of delaying treatments until the last minute to reduce spending. Sir Nigel said that this merely meant that there would be a slowing in the rate at which the NHS was getting better. "It is not unravelling at all," he said.

However, there are some signs of a loss of nerve. Three strategic health authorities - those covering Hampshire, Surrey, Oxfordshire, Berkshire and Buckinghamshire - have partially suspended "payment by results", a central plank in the current reform platform. They fear that paying hospitals for how many patients they treat will cause further instability. Hampshire and Isle of Wight Strategic Health Authority projects a 24 million pound deficit, Surrey and Sussex 41 million. Payment by results is due to apply to 80 per cent of hospital procedures by next April. On January 1, another potentially destabilising policy, patient choice, will be introduced across the NHS.

"Waiting lists are continuing to fall, absolutely on target," Sir Nigel said. "More patients are being treated, and 190,000 more frontline staff. It is a turning-point." Sir Nigel also claimed to have improved quality and value for money, reduced overheads and encouraged innovative ways of offering treatment. So why, in the seventh year of above-inflation increases, was it necessary to make cuts to balance the books? His explanation was that in some areas increasing capacity had got ahead of the capacity to pay for it.

The opposition parties saw the situation differently. Andrew Lansley, the Shadow Health Secretary, said: "The reality on the ground is very different. Across the country, frontline services are being cut and waiting times extended because of deficits. Yet the chief executive's report fails to acknowledge this. "People across the NHS are delivering to the best of their ability, but hampered by targets, bureaucracy and deficits."

Steve Webb, the Liberal Democrat spokesman on health, said: "These cuts are a direct consequence of the Government's market reforms causing financial instability." Niall Dickson, chief executive of The King's Fund, said that the NHS faced real financial problems and that patient services would suffer unless the Government dealt with hospital failures better



The emergence of huge deficits in the NHS after eight years in which funding has more than doubled, to 72 billion pounds, will inflame concern over whether ministers are securing the promised "bang for the billions" being injected into public services. Yet official government statistics show that the vast extra resources pumped into health, education, transport and the rest have produced only modest improvements in the measured delivery of services.

By the end of this financial year, public spending will have breached the 500-billion pounds-a-year barrier for the first time, rising from 330 billion when Labour came to power. It will have leapt in real terms by 13 per cent in only three years. But official estimates show that much of the new cash has been eaten up in increased costs as public sector inflation has climbed far faster than that in the rest of the economy, while productivity has steadily declined.

This resulted in a flurry of new assessments of public sector performance after an inquiry led by Sir Tony Atkinson, Warden of Nuffield College, Oxford. These more rigorous methods of calculation have demonstrated that output of public services is estimated to have risen faster than demonstrated in original assessments. For example, from 2001 to 2003, output of health services rose 3.7 per cent - up from 2 to 2.5 per cent a year that was previously reported.

Yet for every 100 pounds of extra funding going into the NHS, for example, between 52 and 56 pounds has been taken up by higher pay and costs, between 3 and 9 pounds has disappeared in diminished efficiency as productivity has fallen, and only the remaining 35 pounds or so has fed through into real increases in services to the public. Health service productivity is estimated to have tumbled by between 3 and 8 per cent since 1995.

Thus, on the highest figure, if the NHS were as efficient as a decade ago it could produce the same results for patients this year with a budget about 6 billion lower than what will actually be spent. The Office for National Statistics is pressing ahead with efforts to improve the calculations. But the pattern of declining productivity, rising costs and limited return on public cash invested is repeated across the public sector, including in education.

Ministers can argue that while much of the extra money has gone in higher pay and costs, increased pay for key frontline workers in health and education was a necessary part of the prescription of improved services. However, critics argue that the Government has not always imposed sufficient reforms to ensure that higher pay goes hand in hand with improved performance. Official figures also show that 66 per cent more support and administration staff have been hired in the NHS since 1998



For greatest efficiency, lowest cost and maximum choice, ALL hospitals and health insurance schemes should be privately owned and run -- with government-paid vouchers for the very poor and minimal regulation. Both Australia and Sweden have large private sector health systems with government reimbursement for privately-provided services so can a purely private system with some level of government reimbursement or insurance for the poor be so hard to do?

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