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Treasury overseeing NHS spending squeeze

Huge NHS funding increases, enjoyed since 1999, are about to fall as the Treasury asks the Department of Health (DoH) to demonstrate corresponding productivity improvements.

The National Health Service will be forced to concentrate on efficiency, and will also be asked to cut its branded drug budget, according to a Financial Times report based on a leaked Treasury presentation. A Health Committee report, published in 2005, stated that branded drugs account for 80 per cent of the £7 billion spent on all UK drug prescriptions - about 20 per cent higher than other EU countries.

One implication from the leak is that the NHS would be lucky to receive 4 per cent funding growth in real terms, compared to the 7 per cent it has been enjoying since 1999. However, it may get as little as 2-3 per cent, less than the Treasury-commissioned Wanless report estimated it would need post 2008.

The presentation emphasises the need to ensure financial control of the NHS, by managing 'input costs' and by driving 'higher productivity and efficiency through the system'. Input costs include staff wages, and with British GPs and nurses being the highest paid outside Australia and the US, it looks likely that some sort of pay freeze is imminent.

Indeed, the BMA informed Pharmaceutical Marketing that its Chairman, James Johnson, had written to the Health Secretary to criticise the ìdirect intervention by Cabinet ministersî, in a recent independent Pay Review Body process. He was referring to the fact that Patricia Hewitt had written to Michael Blair QC (Chair of the Doctors' and Dentists' Pay Review Body) at the end of 2005, recommending ìa pay rise for doctors of no more than 1 per centî.

It is not only pay that might be affected. The government is also ditching many new schemes, including one designed to help women return to work after childbirth. Health Secretary, Patricia Hewitt, has also controversially refused to honour Tony Blair's pledge to renew St Bartholomew's, and the Royal London Hospitals, without a further review. Former Health Secretary, Frank Dobson, told the BBC that reviews had been done and promises made, and that there is ìno excuse for the government to go back on that nowî.

The BMA have also expressed concern that financial difficulties in the NHS are causing a GP recruitment freeze, with 10,000 GP vacancies remaining unfilled.

The NHS faces a £620 million shortfall this year, and reduced funding next year could result in further deficits. To compound the problem, some schemes are spiralling out of control. The national IT programme for the NHS is expected to cost over £25 billion, four times its original estimate, and with funding cuts on the horizon, questions are already being asked about whether key government goals can be met in the coming years.

Through the Treasury's very own version of 'Payment by Results', pressure is about to be ratcheted up for Patricia Hewitt and the NHS.

30th September 2008

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