Saturday, January 28, 2006

Waste In The NHS

Just how is it that a doubling in NHS spending has resulted in crisis ward closures, cancelled ops, and rationed drugs? The answer is a case study in the appalling wastefulness of Big Government.

The facts are that in the six years since Brown and Blair turned on the taps in 1999-2000, NHS spending (England only) has nearly doubled, from £40.2bn to £76.4bn this year. That extra £36.2bn is the equivalent of 10 pence on the standard rate of income tax, and constitutes "real money" in anyone's book.

But pumping all that extra money into an unreformed NHS was always going to cause problems. And all too predictably, the bulk of the cash has simply been gobbled up in higher costs. Health service measured inflation has been running at 4-5%pa, twice the average national rate. But even that understates the true magnitude of what you or I would call cost increases. The King's Fund analysed in detail the growth in funding between 2004 and 2005:

'In 2005, services... in England, received £5,086 billion more than they received in 2004. However, not all of this has been available to expand and develop health care services (in other words, to open more beds or perform more and better procedures).

Most of the money has been ‘earmarked’ (or set aside) for ‘cost pressures’, such as increased pay and new terms and conditions for GPs, consultants and other NHS staff. Around a fifth has had to be spent on meeting other cost pressures such as clinical negligence claims, the new staff grading exercise (Agenda for Change) and increases in costs associated with guidance on new drugs and procedures from the National Institute for Clinical Excellence.'

So over 80% of the money went on cost increases, with less than 20% actually available to 'develop health care services'. Shocking- particularly when you note that all those 'cost pressures' were generated by decisions taken in the Bureau of State Planning, rather than on the ground close to patients.

What's even worse, of the money left over for developing actual healthcare services, a significant chunk has gone on bureaucrats rather than healthcare professionals. Reform calculates that NHS managerial staff have increased at three times the rate of professionally qualified clinical staff, with managers up by no less than 66% over the period. Again, it's the hand of Big Government: bureaucracy creates bureacrats, and the complexity of today's NHS planning, targeting, and payment systems has far surpassed anything Gosplan ever dared imagine.

Neither should we overlook the mounting burden of servicing those massive PFI debts. That was another top-down government initiative, driven largely by a desire to keep public project debt off the government's books. But in a couple of years time the NHS will be paying well over £2bn pa to service it.

No wonder NHS productivity- the amount we get out for every pound we put in- has been falling. According to official figures from the Office for National Statistics, NHS productivity has been falling by up to 1% pa since the mid-nineties. Value for money has gone down.

The problem we now face is that this NHS spending bonanza- like all previous Big Government excesses- is heading for the buffers. The public finances simply cannot take the strain. So Patricia Hewitt is slamming on the brakes. As a result, our Health Trusts are facing mounting deficits- £1bn this year alone- and all over the country operations are being postponed, beds are being closed, and new hospital projects are being axed.

It is a crisis which is going to get a lot worse for patients and those who work in the NHS. But it is also a crisis we taxpayers must not forget. We are witnessing the dismal results of a huge top-down programme to fix our public services not with reform based on choice and competition, but with massive injections of money. Our money.

The waste is running into billions.


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