News / Budgets set tough challenges for NHS in Scotland and Wales

Health services in Scotland and Wales have been handed a tough financial settlement for the next few years after local politicians put forward draft health budgets.

The budgets were drafted last month following the UK-wide spending review. The NHS in Wales will get zero revenue funding growth in 2011/12 and 2012/13, with a small cash rise in 2013/14 (£14m or 0.2%). The capital budget will fall by £83.5m or 27.5% over three years, with the largest reduction (12.6%) in 2011/12.

In Scotland, where there will be an election to the local Parliament next May, the draft budget covers 2011/12 only. NHS boards’ overall allocations will increase by 2.7%, though the territorial boards’ funding will rise by 3.2%.

The government said it had been able to direct as much funding as possible to frontline services by adopting a new approach – setting a differential efficiency target. The territorial boards have been set a 3% cash-releasing efficiency target, but it is higher for those that do not provide frontline care.

Health secretary Nicola Sturgeon said resource funding will rise by £280m, reflecting the government’s commitment to pass on the Barnett consequential to the NHS. About £90m will be cut from the capital budget, which will fall to £488m.

Finance managers said the settlement was tight. The £280m cash increase included a £70m fund to be held by health boards and spent in partnership with local authorities to redesign services. The cost of abolishing prescription charges next April would also have to be found from revenue budgets.

‘The cost increases in the service far outstrip the money being made available,’ said one manager. ‘Even with pay rises being frozen, there are still the pay increments, the rise in VAT and the potential increase in the drugs bill.’

The mood was similarly gloomy in Wales. Finance professionals said unavoidable cost increases were similar to those in Scotland, and likely to be 4% in 2011/12. This was in addition to the 6.3% real terms reduction in health spending over the three-year period.

Minister for business and budget Jane Hutt acknowledged unavoidable cost pressures would have to be funded through savings.

Kate Watkins, Welsh NHS Confederation acting director, said the service faced a significant financial challenge. ‘It is going to require every reserve of skill and expertise to ensure that the NHS is able to keep improving the quality and safety of care whilst meeting rising demand,’ she added.

HFMA Wales president Chris Lewis said it was disappointing that funding growth in NHS England did not appear to have been passed on to the NHS in Wales, but added: ‘The overall settlement is better than anticipated. There were fears Wales could have had a cash reduction of up to 3% year on year.’