The government’s public expenditure plans for the NHS and social care are based on assumptions “which will test these services to the limit,” says an influential group of MPs.

The plans assume efficiency improvements in both social services and the NHS, including a 4% efficiency gain for the NHS for four years running. However, “there is no precedent for efficiency gain on this scale in the history of the NHS, nor has any precedent yet been found of any healthcare system anywhere in the world doing anything similar,” says Stephen Dorrell MP, chairman of the House of Commons Health Committee.

In his May 2009 annual report, NHS chief executive Sir David Nicholson had estimated that the Service would require efficiency savings totaling £15-20 billion over the next four years. In a report published today, which details the findings of their recent inquiry into the implications of this commitment for patients and NHS staff, the MPs refer to the requirement to deliver this result as “the Nicholson Challenge,” and point out that it has been endorsed by the Health Secretaries of both the last Labour and current coalition governments.

Equivalent assumptions about efficiency gain underlie the closely-related services provided by local authority social service departments, and these are important, not only for the quality of service provided to elderly and disabled people, but also because “it is widely accepted that when failures occur in adult social services, the burden falls on the NHS in the form of poor health outcomes, avoidable hospital admissions, delayed discharges and so on,” said Mr Dorrell.

The government’s announcement that £1 billion will be transferred from the NHS budget to social service departments to develop social care facilities is a “step in the right direction,” says the Committee. However, the MPs also stress the need to use this as an opportunity to make a step change in the interface between health and social care which, they say, will be “mission-critical to the successful delivery of the Nicholson Challenge.”

Against the background of an NHS budget which is broadly stable in real terms, the Nicholson Challenge is not about cuts, but is about doing more with the same amount of money, say the MPs. However, they also believe there is a serious danger of this objective being lost from view, and they agree with British Medical Association (BMA) chairman Dr Hamish Meldrum that the government needs to develop a “better narrative.”

While “numerous” witnesses to the inquiry pointed to the additional risks created for the NHS by the proposed restructuring of Service management, the Committee says it will reserve its main opinions about this until it publishes the findings of a separate inquiry into the future of NHS commissioning, which is currently underway.

However, the MPs say that they were “impressed” by Sir David Nicholson’s recognition that it is not possible to “sustain 152 independent Primary Care Trusts (PCTs) between now and 1 April 2013,” and his forecast that existing PCTs would form into clusters “both to enable them to devolve their responsibilities to local government and consortia and, on the other hand, to enable them to hold on the accountability chain, which is going to be so critical for us over this period.”

The need to “hold on to the accountability chain” will be fundamental to the delivery of the Nicholson Challenge, and therefore to the delivery of the Spending Review, say the MPs in their report.

They are also particularly concerned about two other issues affecting the outlook for spending in the NHS. First, they call on the government to produce an estimate of the likely cost of its reorganization proposals, rather than continuing to use the figure of £1.7 billion included in the NHS Operating Framework for 2010-11 which, they note, was published before the election of the current government.

The MPs are also sceptical about the government’s belief that 40% of the efficiency gain required by the Nicholson Challenge (some £6-£8 billion) can be achieved simply by reducing the tariff. While recognizing that opportunities exist for efficiency gain as the tariff is reduced, the MPs say they are “concerned that excessive reliance on this instrument will result in both quality reduction and crude cost-shunting.”