NHS Efficiency Target: Confusion Reigns

Confusion reigns in government over what the efficiency targets are for the NHS.

To recap: in the Budget (para 6.14) it says that by 2013-14 the health service will be making annual efficiency savings of between £15bn and £20bn – that is roughly 15% to 20% of their entire spending.

Just before a hearing of the Treasury Select Committee on Monday (29th March) I talked to Robert Chote, head of the IFS and a fellow witness to the committee. We agreed this had to be an error and the £15-£20bn must be a cumulative figure over the next four years.

Nevetheless I thought it would be a good idea to raise it with the Treasury Committee, as if it was a mistake it was a whopper. And if it wasn’t, it was an even bigger story – the government claiming it could make 4-5% a year efficiency gains in an NHS that has seen its productivity decline over recent years according to the Office of National Statistics. I also put this issue on this blog, and NHS officials started contacting me to say it was a mistake – it was cumulative not an annual figure.

On Wednesday I contacted the Department of Health and was told that it was indeed a cumulative figure, which makes more sense (even if as a cumulative figure it is still hard to stack up – just not as hard as 15-20% annual efficiency savings across the NHS in four years time).

What I didn’t know was that members of the Treasury Select Committee had tried to get out of the Chancellor what exactly para 6.14 meant on Tuesday.  The Chancellor robustly defended the ‘annual £15-20bn savings’ statement in the Budget.

For example:

Mr Tyrie: These savings in the Health Service are £15 billion to £20 billion annually.  Do you really think that is something the electorate will find plausible?

Mr Darling:  Yes.  The NHS has a budget of about £100 billion and I do not think it is unreasonable to put very demanding targets on it.

And later in the evidence session:

Mr Brady:  Chancellor, just to come back to you and your initial response, we had some confusion with officials yesterday as to whether this £15-20 billion was an annual figure that would be achieved recurrently.

Mr Darling: We get there over a period, but it is an annual figure.

Mr Brady:  So from 2013/14 you are expecting that £15-20 billion to be achieved each and every year?

Mr Darling: That is right.

So there you have it – the Chancellor really does expect the NHS to save between 15-20% of its budget every year by 2013-14. Admittedly, he went on to say that most of this would be recycled into ‘front-line services’ and it was not a cut in the NHS budget of £15-£20bn – but even so this is an astonishing target if true.

The DoH and NHS officials I’ve spoken to beg to differ and maintain its an annual target of about £3-5bn, cumulating to £15-£20bn savings over four years. Who is right? It’s surely time someone at DoH cleared this up definitely one way or the other?


About Prof. Colin Talbot

Research Associate, University of Cambridge Professor of Government (Emeritus), University of Manchester
This entry was posted in Performance, Spending. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s