News / Pre-Budget sets savings task

The NHS must contribute to a £5bn increase in the public sector savings target for 2010/11, moving the target from £30bn to £35bn, November’s pre-Budget report said.

Widely expected to mean an extra £1bn of savings for the NHS, the report suggested that savings would come from better use of estate and improved commissioning. For instance better estate utilisation would reduce the need for new hospital space by up to £3bn and save up to £100m per year over the next spending review period.

NHS bodies will also be hit by the increase in national insurance contributions from 2011. NHS Employers suggested this would add over £100m to the NHS pay bill, based on estimated wages of £40bn for the year.

However, trusts stand to benefit from a temporary 2.5% reduction in the VAT rate. Consultants KPMG told Healthcare Finance that, based on a sample of 15 trusts, an average trust could expect to save around £1.3m from this change, with the full range stretching from £200,000 to £2.9m. The consultants warned that this benefit could be offset if proposed restrictions to contracted-out service headings were introduced.

Public sector growth overall will be just 1.3% in 2011/12, falling to 1.1% in 2013/14.