The NHS in 2010

The aim of this paper is to provide an assessment of change in NHS expenditure and outputs from now to 2010. The evidence is reviewed on forward commitments and on the likely changes in levels of activity.

In official doctrine the NHS plan is presented as an assured long-term macro success, which will be reached through temporary friction in problems over waiting times, access and quality. Such problems are usually attributed to past under-funding. In this paper evidence is presented that new problems of friction are being created by the timing of the NHS change itself.

Reform denotes incentives aimed at increasing value from existing spending; funding is about additions to the resources available. Reform seeks to increase productivity from the existing core while funding makes marginal changes to staffing and capacity. Funding and reform have often been presented since 2000 as being simultaneous and complementary but in reality funding has come before reform.

By 2010, total expenditure will be 10.5-11.0 per cent of GDP, which will be well above the European average and more than 50 per cent higher than the GDP shares of Scandinavia and New Zealand. On a worldwide basis the public sector share of spending is likely to be the highest of any system.

The NHS will be facing serious affordability problems from commitments on PFI schemes, staffing, the GMS contract and Treatment Centres. There will be tension between these commitments and funding for innovations and new therapies. It will be difficult to fund both the unfinished agenda set by NICE and National Service Frameworks and the new therapies which will be emerging in the future.

The failure to use reform earlier means that waiting time targets will be reached much later and at much greater cost. The reform experience in the UK and other systems would indicate that the six month waiting time target could have been reached in 2004 instead of 2005 and the three month target in 2006 instead of 2008, earlier results which would have benefited thousands of patients.

The 2005 waiting time target has only become even remotely attainable because of new programmes introduced when it was clearly not going to be achieved. Treatment Centres, a costly programme introduced in 2003, were not even mentioned in the 2000 NHS Plan. Even this, however, is not enough and a programme of purchasing from the private sector is now to start. If these new programmes had been combined far earlier with incentives for the core health service, the waiting list targets would have been much more easily and quickly achievable. As it is, it will be almost the whole decade of the plan before the NHS begins to approach minimum international standards in waiting time and access.

Experience both internationally and in the UK shows that reform, based on changing incentives, can improve access significantly. Waiting times in Spain and Denmark have fallen sharply since new financial incentives were introduced. In the UK, reforms such as financial penalties for prolonged hospital admissions and patient choice have been successful.

There has been a tendency to attribute success to funding where it should have been attributed to reform, particularly in regard to cancer services, coronary heart disease and accident and emergency services.

The funding first decision has perverse effects for the UK as a whole. Public funding is now rising twice as fast as private. There is a high risk that the cost increases will crowd out the spending which would be required for new and unpredictable changes in therapies and technology. The NHS may be stuck with long term spending on yesterday’s systems.

There is also risk that the high rate of increase in spending will not be sustainable if the growth of GDP falls to 2 per cent a year or if other priorities emerge. The increase in health spending has been funded in part by a reduction in the growth of social security spending and an actual reduction in defence spending. If NHS spending were to be contained at 9 per cent of GDP rather than 12 per cent, the middle forecast in the Wanless Report, the saving over a decade at 2004 prices would be £330 billion.

There is much that is positive about the aim of a patient-centred service with more focus on long term illness. There is much to admire about the commitment and dedication of staff in the NHS. In terms of the UK’s longer term social and economic challenges, however, the level of spending projected for 2010 represents poor value for money. With reform followed by some additional funding the UK could have a major improvement in access and effectiveness for 8-9 per cent of GDP. That would be 2 per cent of GDP – around £20 billion in today’s prices – less than under current plans.