Labour to cut £20bn off NHS budget

The National Health Service will have to find savings of £15bn ($24bn) to £20bn, Andy Burnham, the labour health secretary, has acknowledged.

Hospitals are to get their first indication in the autumn of just how far and fast they will have to cut costs to help achieve that. His acknowledgement of  the scale of the challenge comes as Gordon Brown and Alistair Darling, prime minister and chancellor, have begun a series of meetings with cabinet ministers to discuss priorities and potential candidates for cuts in the run-up to the pre-Budget report in the autumn.

Labour Government insiders played down suggestions that the autumn statement would be a mini spending review, setting out departmental spending limits beyond March 2011.

But after the prime minister’s use of the “c” word this week, promising to “cut unnecessary programmes and cut lower priority budgets”, the chancellor is likely to offer some totemic sacrifices in the pre-Budget report, while possibly spelling out areas likely to be protected from the worst of the squeeze.

It is already clear that the capital intensive areas of transport and housing are set to take a hammering given previously announced plans to halve capital spending from this year’s level.

“They will almost certainly be amongst the hardest hit,” said Robert Chote, director of the Institute for Fiscal Studies.

Health is likely to be relatively protected, not least because the Conservatives are promising some real terms growth. That, however, will still leave the NHS having to make massive savings in the face of rising demand from medical advances and an ageing population, which together with pay and price inflation tend to outstrip economic growth.

Mr Burnham indicated this week that he would like to set out an “overall spending settlement” for the NHS in the autumn, while acknowledging that is a matter for the chancellor.

But whether that happens or not, he told the King’s Fund health think-tank, he will take the unprecedented step of spelling out the prices the NHS is likely to pay hospitals for treatment over the next four years.

That “will set out the scale of the efficiency and productivity challenge year on year, building up over time, with the most demanding savings coming later,” he said. In turn, he said, that “will begin the process of showing how we realise [the] challenge of finding £15bn to £20bn of savings” up until 2014.

Nigel Edwards, head of policy for the NHS Confederation, which itself has calculated that the NHS needs to make up to £15bn of savings by 2015, said: “This is the first ministerial acknowledgement that I have seen of the scale of the challenge.

“The good news is that it has been publicly acknowledged, and we welcome that realism. The bad news is that it is at least as bad as we thought”. 

“The price schedule, or tariff, covers about 70 per cent of hospital activity, which itself accounts for only some 40 per cent of the NHS budget. So spelling that out will give an indication but not a firm projection of likely level of NHS spending.

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