'Question mark' over NHS savings

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Embargoed to 0001 Wednesday February 12File photo dated 07/12/10 of a general view of an NHS logo. It is unclear what billions of pounds of NHS savings have been spent on, MPs have said. PRESS ASSOCIATION Photo. Issue date: Wednesday February 12, 2014. While the NHS has managed to create substantial

It is unclear what billions of pounds of NHS savings have been spent on, MPs have said.

While the NHS has managed to create substantial "efficiency savings" in recent years, these have come from easy areas such as cutting management costs and freezing pay and are under threat in the future, the Health Committee said.

The NHS was told by the Government in 2009 it must deliver up to £20 billion of efficiency savings by 2014/15 while maintaining or improving the quality of patient services. The Department of Health has said every penny saved will be reinvested in patient care.

But today's committee report found a lack of transparency over what the cash has actually been spent on.

MPs also warned that NHS trusts are at risk of failing to meet the savings target - named the Nicholson Challenge after outgoing NHS chief executive, David Nicholson.

In the first years of the challenge, the NHS made savings of £5.8 billion in 2011/12 and a further £5 billion in 2012/13.

Plans for this financial year show expected savings of £4 billion - 15% below the target for the year.

Evidence from the think tank the King's Fund to the committee shows that NHS finance directors are not confident they can continue to meet the challenge.

MPs pointed to other warnings that the "quick wins" have already been included and that savings will
become progressively harder to achieve over time.

They expressed concern that a "significant element of the progress so far has been delivered through pay restraint, reductions in the tariff and cuts in management costs rather than genuine improvements in productivity.

"We also reiterate our concern that too much emphasis has been placed on generating financial savings, rather than on improving the quality of services for patients."

In evidence to the committee, economist John Appleby from the King's Fund said the "real issue is not about saving money but what you spend that money on".

He said: "Presumably, we are saving admin costs not because we like to save admin costs but because we face the need to provide more hips and do more. It is about spending that money on something else.
My point about the reporting, in a sense, is that we do not quite know where the money has gone."

The Nuffield Trust also said the NHS has met some of the challenge simply by underspending the NHS budget each year.

It added that pay freezes have provided more than £5 billion of savings alongside other measures such as cutting administrative staff.

Anita Charlesworth, chief economist at the Nuffield Trust, told the committee: "It does feel as if we are hitting an imbalance. People have made the easy savings and they are running out. By NHS England's admission, we are not seeing very much progress with transformative savings, and quality pressures are really starting to bite."

The report said there was a "question mark" over how sustainable the savings were.

It said: "Straightforward savings which are possible have now been made, and the transformation of care that will be required to make the NHS sustainable in the future and able to deal with increasing demand has yet to take place.

"On this final point, the key question, raised in evidence, is not 'what has been saved?' but rather 'what has the money 'saved' been spent on?'.

"That is currently not transparent, and more needs to be done to demonstrate what new activity has been possible because of the gains of the efficiency process."

The committee welcomed the Government's recognition that the future of the health and care system cannot be built on "an open-ended pay freeze".

It also said the pressure on resources across the whole system, but particularly in social care, are much greater than they were a few years ago.

Conservative MP and committee chairman Stephen Dorrell said: "The Nicholson Challenge requires the health and care system to deliver fundamental change so that services are joined up and focused on the needs of patients.

"What we have heard during our inquiry indicates that while many of the straightforward savings have been made, we have not seen the transformation of care on the scale which is needed to meet demand and improve care quality.

"The NHS budget is static and the social care budget is falling. In these circumstances, the successful integration of high-quality health and care services represents a substantial and growing challenge."

He added: "We also recommend, as we did a year ago, that the current level of real terms funding for social care should be ring-fenced.

"Alongside the Government's commitment to maintain health spending at current levels in real terms, this would give certainty about budgets for a whole health and care economy and provide a firm financial basis for health and wellbeing boards to plan and implement transformative service change."

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