Hugh Bayley: IS the National Health Service in danger?

The Government has set the NHS three tough financial challenges. First, their spending review cut the annual increase in funding to 0.1 per cent a year for four years – and rising inflation has already turned this into a 0.1 per cent cut. Under Labour, the NHS budget grew by 5.7 per cent a year to keep pace with demand.

Second, the spending review has switched £1bnn a year from health to social care – which is good for frail elderly and disabled people but bad for those needing hospital treatment.

Third, the Government has ordered “efficiency” savings of £20bn by 2014 – a squeeze of four per cent a year. Political parties talk about efficiency savings when in opposition, but it is brave in government.

Where will these savings come from? Over the next two years, Ministers say almost half will come from their freeze on pay. I was a health service trade union negotiator when Jim Callaghan’s Labour government imposed pay restraint in the 1970s. The current Government may make their pay freeze stick for two years, but it will be followed by a pay bounce.

The Office of Budget Responsibility forecasts that earnings will rise by 4.1 per cent in 2013/14 and 4.4 per cent in 2014/15. Public sector workers won’t accept a pay freeze when inflation and private sector wages both rise.

The Government expects another slab of efficiency savings to come from cutting the NHS tariff – what they pay per treatment. If there is fat in the system, this would cut costs, but when the tariff falls below the cost of the treatment, the quality of care will suffer. There is good evidence that price competition in health care leads to poorer standards – at its crudest, fewer patients recovering and more dying.

All the parties agree that public expenditure – which was necessary to avert the banking crisis and recession – now needs to be trimmed, although we differ over how deep and fast the cuts should be. But it is fair to ask Labour politicians: “What would you do now?”

If I was a health minister, I would stop piling new cost pressures on to the NHS. The reforms will increase costs in several ways; for example:

They are replacing 150 Primary Care Trusts, which “commission” care with 3-400 GP-led commissioning consortia. This will increase costs.

If you have more, but smaller, commissioning bodies you will lose economies of scale and, with fewer staff, they will be less able to hold big hospitals to account – yet it is hospitals that have been racking up NHS spending.

GPs are good at treating patients but few have training in controlling costs, so why are they being put in charge of the budget?

There are huge variations in the cost and quality of treatment provided by different hospitals and doctors, and big differences in productivity. Small scale purchasing will do less to identify good practice and root out inefficiency.

Greater use of private hospitals and doctors will cost more; the private NHS treatment centres set up by Labour cost more per patient than NHS care.

They will pay millions to make PCT staff redundant, and then rehire many to work for commissioning consortia; they should ban golden handshakes for people who stay with the NHS.

As a Leeds MP, Denis Healey once said: “When you are in a hole, stop digging.” Apply that to the health reforms.

There are savings which could be made, not without pain, but largely without affecting front line services.

Before the General Election, I proposed cutting a layer of bureaucracy by abolishing the PCTs. But unlike the Government, I did not suggest setting up 300 or 400 new commissioning bodies. The work should go instead to the eight strategic health authorities.

This would take some decisions away from local level, I accept, but we would still have a voice in Yorkshire. Under the Government’s proposals, decisions about many services will be made centrally by a single national NHS commissioning board.

The region-wide strategic authorities would hold hospitals and clinicians to account, spot local practice because of their regional overview, and achieve economies of scale.

Lord Hutton is reviewing public sector pensions. I want to keep index-linked pensions, based on earnings, but the NHS scheme will become ever more unaffordable if it is not reformed. Changes could be made to reward people who retire later and to base pensions on average earnings, increased for inflation, rather than final salary. No one likes changes but adjusting pensions, especially for higher earners, may be more palatable than pay freezes.

Under Labour, health service pay rose faster than inflation but productivity slipped. In private companies, pay reflects productivity, and so should NHS pay.

Savings should be made by improving partnership between hospitals and primary care – to prevent ill-health, avoid some hospital admissions and get patients home earlier. This will require big changes from GPs and hospitals, but if GPs control the budget, they will have less incentive to change.