Comment / Prepare for a decade of delivery

The NHS may not know for certain what growth to expect after the current spending review period. But PWC’s Ian Wootton says that the need to deliver significant savings – up to £10bn from 2012 – is absolutely clear

In the autumn of 2008, primary care trusts, as part of the world class commissioning process, were asked to set out five-year commissioning strategic plans with supporting financial plans. These financial plans were based on the best perceived wisdom as to the future of the economy at that time. We knew then that the economic conditions could mean that PCTs’ financial plans may be at risk. We now know that they will have to change dramatically.

In PricewaterhouseCoopers’ Dealing with debt report released in March 2009, John Hawksworth and Nick Jones suggested the UK could still be facing a fiscal gap of £43bn by 2013/14. To address that gap they considered two options: a severe clampdown on public expenditure and £25bn of tax rises with a less severe clampdown on public expenditure. 

In both cases, they assumed that healthcare and education will be preferentially funded.  Even so in option one, healthcare is assumed to have 0% real growth and in option two 1% real growth. But if the fiscal gap is to be addressed, other government departments will have to cut costs significantly on a real basis in both options. The decision therefore to preferentially fund healthcare will be at the expense of other government departments.

From our work with SHAs and PCTs to stress test PCT financial plans, we know that on a national basis, if real health funding growth falls to 1% or 0% after the latest comprehensive spending review, savings of up to £7bn may have to be found from 2012 onwards. For the whole of the NHS this could mean savings of more than £10bn are required.

In the recent Budget, the chancellor was economically and politically constrained. He projected better economic forecasts than our Dealing with debt report and pointed the way to a further £9bn in savings being achieved through the Treasury’s operational efficiency programme – effectively from back office savings rather than frontline services. Clearly there is opportunity to achieve some of these savings. The questions are how quickly they will be realised, and are they enough? The answers are probably too slow, and too little, unless very well implemented.

The need for political expediency and timing have not allowed for any admission, nor the required forecasts, about exactly how public expenditure increases will reduce after this spending review period. The facts are that if the UK government is going to achieve some degree of credibility with the international financing community to fund the UK debt, we must have an acceptable plan. This plan will require cutting pubic expenditure. But as the Budget indicates, these cuts will need to be delivered after the current spending review period and, more importantly, beyond the next election.

So where will these savings, £10bn or so in 2012/13 in healthcare, come from? Providers will have to look for significant productivity gains. PCTs as commissioners will need to take tough decisions on what healthcare services they should buy and how they contract for them. Expect it to get tougher. Most opportunities for productivity gains have been identified. There are no silver bullets. The next decade will be one of implementation and delivery.

The economics are clear, the potential solutions are clear, but the politics are not.