The NHS is facing a deepening financial crisis

It is 65 years since the creation of a national health service, free for all at the point of delivery. It is this founding principle that makes up the DNA of the NHS. But for it to remain a reality the NHS has to remain financially viable. It is why politicians continue to promise to protect and increase the health budget year on year.

The reality, however, is very different. The government’s latest comprehensive spending review showed that the massive, annual, and recurrent “efficiency savings” target for the NHS in England—dubbed the Nicholson challenge—will continue for at least a year longer than originally mooted. This means that by April 2016 the service will have to make do with only three quarters of the budget it actually needs to keep pace with demand and technological advances. And the response so far to this challenge only serves to make the threat to financial viability even bigger.

Last month the chancellor of the exchequer, George Osborne, unveiled his latest spending round, in which he announced that the budget of the Department of Health in England would rise from £108.3bn in 2014-15 to £110.4bn in 2015-16, representing a rise in health spending of 1.9%. However, taking into account an allowance for general inflation of 1.8% the true figure is modest growth of just 0.1%.1 And the trend is set to continue whoever wins the next election, with the Labour party ruling out the “massive increases” in the NHS budget seen under the previous government.2

So what does this mean for the NHS? In 2009 the then NHS chief executive, David Nicholson, established the QIPP (quality, innovation, productivity, and prevention) programme to deliver efficiency savings in the NHS of £15-20bn between 2011 and 2014.3 Nicholson’s challenge has been the bedrock of the current government’s plans for continuing to fund the NHS at its current level. In 2010 Osborne unveiled a spending review underpinned by an expectation that the NHS would generate enough resources through these efficiencies to “deal with rising demand from an ageing population and the increased costs of new technology.”4

However, the latest comprehensive spending review shows that the NHS will have to find the £20bn and then continue to build even more savings on top. We are seeing demand for NHS services rising at a rate of 4% a year.5 If this continues with the modest levels of growth anticipated by the comprehensive spending review, then the NHS will need to generate further efficiency savings of £4.25bn to stay within budget. This would mean a total of £24.25bn of recurrent savings by 2016—or just under a quarter of its total budget.

The government claims to be on target to meet the Nicholson challenge, but a quick look at where these savings are coming from raises more concern. A National Audit Office report last year found that the NHS had made efficiencies of £5.8bn in the year 2011-12 but that most had come from centrally imposed pay freezes and cuts in the tariffs due to providers.6

It is totally unrealistic to think that the NHS can wipe out a quarter of the budget that it needs by chipping away at staff pay and staffing levels. The scale of the savings that need to be found would require pay and staffing levels to be decimated, creating safety and workforce problems that would simply make the service unviable.

Already, doctors are citing relentless demand as the biggest reason they cannot make the improvements to patient care that are needed. A recent BMA survey showed that around two thirds of doctors wanted to make changes but that, of this group, nine in 10 cited major obstacles to achieving improvements, primarily lack of time, capacity, or support.7 Doctors tell us they feel frustrated and disempowered in the face of ever increasing patient demand. The recent, widely reported problems in urgent and emergency care are not a one-off event but a symptom of the much deeper pressure on the whole health system.

The government’s response seems to be to offer up scapegoats or to tinker at the edges—blaming the 2004 GP contract for the 2013 crisis in emergency care or announcing a major crackdown on so called “health tourism” that might, at best, save the NHS £30m a year.8 9

The NHS is facing a deepening financial crisis. The recent comprehensive spending review must serve as a wake-up call.