News / News review - the past month in healthcare finance

The past month has, of course, been dominated by the general election campaign. Health has been a key battleground but the policy differences have often been one of nuance rather than polar extremes. Perhaps the parties were playing it safe, calculating that anything too radical would scare voters and could be left on the shelf until after they take power. Or perhaps their room for manoeuvre has been limited by the state of the country’s public finances.

For all parties the answer was to focus their NHS pronouncements on the need to increase quality and efficiency simultaneously. For the opposition parties, the efficiency part of the equation briefly led to criticism of the Department of Health’s stockpile of 34 million swine flu vaccinations. The original order was for 120 million but the NHS will pay for 44 million, including the 6 million dispensed, and 3.8 million going to the World Health Organisation in Africa.

However, the temptation to use the efficiency stick to beat NHS managers proved too great. In their manifesto, the Conservatives referred to ‘expensive layers of NHS bureaucracy’ and promised to cut administration costs by a third (perhaps including the 30% already due to be removed from management costs?).

The Liberal Democrats pulled no punches with their plans to take an axe to NHS management. Not only would Department of Health costs be slashed by 50%, but they would also scrap strategic health authorities and turn primary care trusts into elected health boards. Labour said there would be no top-down restructuring of PCTs and SHAs, which does not rule out the shared management and clustering arrangements being proposed in some parts of the country.

Not content with slashing their numbers, both Tories and Lib Dems would rein in senior managers’ pay, though in reality this might not be too discomfiting for top NHS managers. In the aftermath of reports that senior NHS managers received an average 7% pay rise in 2008/09 (see news analysis), both promised a ceiling on pay. The Lib Dems said no senior NHS manager would be paid more than the prime minister – currently about £197,000 a year, though recent prime ministers have declined to take the full amount – while the Tories would set the threshold at 20 times the salary of the lowest-paid person in their organisation – currently £226,000, if the lowest-paid person is assumed to be over 21 and earning the minimum wage.

The report on senior managers’ pay, from research body Incomes Data Services, brought former NHS chairman and conference regular Roy Lilley to our television screens (left) to mount at least some defence. He told Channel 4 News: ‘These are huge organisations which these people are running: an almost £1bn budget, employing up to 12,000 people. If wrong decisions are made, people die. They have to make very big decisions and these organisations are very hard to run.’ He added that managers had a ‘strong sense of vocation’ and that many of them could be better paid in the private sector. He insisted that pay rates should not come down, although he expected that there would now be a freeze ‘for a few years’. But in a month of manager bashing, Mr Lilley’s voice was closer to a solo than a chorus.

Back in the election campaign, the big differences between the Tories and Labour have been over the latter’s proposed increase in national insurance contributions – which Tory leader David Cameron (left) claimed would cost the NHS £200m a year – and the speed at which the public finances can be put back on an even keel.

The Tories even wheeled out former Whitehall efficiency guru Sir Peter Gershon (right) to say £12bn could be found in efficiency savings in 2010/11. This included saving £2bn-£4bn by cutting IT spending. Reducing the use of agency staff and freezing vacant posts would save between £1bn and £2bn – translated as a loss of 20,000 to 40,000 jobs across the public sector.

Much of the popular interest has been focused on the live televised leaders’ debates, which have included skirmishes on health. More interesting was a debate for the health spokesmen organised by the King’s Fund, British Medical Association, NHS Confederation and RCN. Payment by results got a mention, but seemed only to confirm the opposition parties would follow Labour’s lead of widening its scope and linking payments to quality.

The King’s Fund has been to the fore during this election – co-hosting the health debate above and helping to set the policy context. Its report, A high-performing NHS?, was published as the parties entered the second week of the campaign and vindicated much of what the government has done over the last 13 years.

It highlighted the major reductions in waiting times and healthcare-associated infections, and the progress made in lowering the number of smokers. And while higher pay had absorbed half of the huge increase in NHS spending since 1997, reducing productivity, substantial savings had been made in the cost of medicines and other goods and services.

Despite improvements, the service had more to achieve. There were gaps in quality and health inequality, as well as variations in access, the fund said. And it warned the NHS may not be fully prepared for the tough financial circumstances of the next few years.

One titbit of information did sneak under the election radar. Quarter three figures for foundation trusts (2009/10) showed their finances remained healthy, with rising income driven by increased activity. But the increase in income was almost matched by the increase in operating costs, which was largely related to activity. At the end of Q3, costs were £487m above plan, while income was £445m above plan. Trusts hoping to weather the financial storms ahead by increasing activity, take note.