Treasury could snatch £3bn from NHS budget, academic warns

The Treasury could try to claw back more than £3bn out of the NHS to contribute towards the credit crisis bail-out package, a leading health service academic has warned.

The NHS in England is currently forecasting it will have a £1.7bn surplus this year and Foundation Trusts, which are not under the direct control of Whitehall, have £2.5bn in the bank.

Prof John Appleby, chief economist at think tank, the King’s Fund, has analysed the effect the financial crisis will have on the health service in the short, medium and long term, in the British Medical Journal.

He warns that the Treasury has a ‘track record’ of clawing back surplus funds from the NHS.

He wrote: “Although the prime minister pledged not to cut spending for health as set out in the 2007 comprehensive spending review, taking back unspent money may not be seen as a cut.”

Prof Appleby said in the short-term the effects on the health service have been minimal, although Virgin Healthcare announced in September that it would not be bidding to run GP-led health centres yet, and several charities and NHS trusts have money on deposit with failed banks in Iceland.

In the medium term, spending on health is supposedly fixed until 2011 so while an outright cut in labour Government funding is unlikely, the NHS budget is being eroded by high inflation.

It is thought that inflation may have peaked but inflation in the NHS runs a little higher than the general economy and every one per cent increase costs the NHS £380m, Prof Appleby wrote.

The real danger for the NHS is in the long term because, with labour Government borrowing rising, and income from taxes likely to fall during a recession, there will be less available to keep up the growth in health funding.

Prof Appleby warned that there may be no real growth in funding until 2014, in contrast to the large real terms increases enjoyed under Labour so far.

The financial situation is also likely to increase demand for health services, so the NHS will be squeezed from both sides, he said.

Prof Appleby wrote: “But not only will there be pressures on NHS funding, the combined effect of the credit crunch and recession on the population’s health and wellbeing will increase ill health and demand on healthcare services.

“The link between deprivation, income, housing, unemployment, and healthcare needs is well documented.”

A Department of Health spokesman said: “While the current financial position is settled for this spending review period, good financial planning means that the NHS needs to plan on a longer-term basis and this means looking to at least a five-year timeframe.


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