Chancellor Alistair Darling has promised to boost government spend on the National Health Service “over and above inflation” after 2010-11, to help sustain service improvements and cope with rising demand.

The pledge was made in yesterday’s pre-budget report, which laid out the foundations of the government’s spending plans next year, largely aimed at slashing overall deficit to help the country better weather the current economic downturn.

While the chancellor predicted that the UK economy would start growing again “by the turn of the year”, he also stressed “we have to be realistic – the spending environment will be tough over the next few years”, but promised that, even in a tighter financial climate, the government is “determined to protect frontline services and sustain the improvements that have been delivered over the past decade”.

Darling noted that the NHS has already managed to make efficiency savings of £10 billion, but also announced that pay rises for NHS staff (and all other public sector workers) will be capped to 1% from 2011 to help gain further ground on plugging the hole left by near-term budget shortfalls.

British Medical Association council chairman Hamish Meldrum has applauded the commitment to protect frontline NHS services and agrees that the health service should be protected from spending cuts that would ultimately hit patient care. However, he said it is a “grave error” to penalise staff “with arbitrary caps on their pay”, and that “real savings” could be made from killing off “bureaucratic and wasteful market based policies” instead.

In addition, while NHS Confederation boss Steve Barnet also welcomed the promise of more money from 2011, he warned that the rising cost of healthcare provision, driven by an ageing population and advances in medicine and technology, means there will still be a real pressure on budgets.

“The NHS Confederation has already said that savings and efficiencies of between £15-20 billion need to be found in the NHS in the next five years and today’s announcement only serves to confirm the scale of the challenge which lies ahead,” he said.

And according to Professor John Appleby, chief economist at health policy think-tank The King’s Fund, real-term budget shortfalls in the NHS mean that trade-offs will be essential in securing a health care system fit for the 21st century. “Every pound spent in the NHS will need to be stretched further, but at the same time we have to ensure patient safety and quality of care are not compromised,” he stressed.

Patent box
On a different note, the chancellor has also promised to put in place moves to help encourage research in the biotechnology and pharmaceutical sectors, including a cut on corporation tax on income stemming from patents in the UK, as well as the creation – alongside the Wellcome Trust, Cancer Research UK and University College London – of “the largest institute in Europe for research into long term medical challenges”.

According to David Norton, tax partner at Deloitte, industry in the UK will warmly welcome the decision to introduce the new tax relief. “The chancellor estimates that the cost of the relief will build up to £1.3 billion per annum over an unspecified number of years. In truth, if the relief is to work effectively one would envisage that it would attract income into the UK and so lead to increased tax receipts that might fully offset the reduction caused by substituting the lower rate,” he remarked.

Surplus forecast
Meanwhile, the Department of Health announced that following the second quarter of 2009/10 the Strategic Health Authority and Primary Care Trusts sector has turned in a “healthy” overall financial forecast predicting a surplus of £1.2 billion, with a further £217 million of surplus forecast in the NHS Trust sector.

Commenting on the report, David Flory, director-general of NHS Finance Performance and Operations at the DH, said: “A strong financial position, backed by good progress on delivery, will continue to ensure high quality services for patients, despite the current economic climate”.