The National Health Service is facing a real-term shortfall of £15 billion in the five years after 2011 when spending growth looks set to dry up, in what the NHS Confederation claims will be “the most severe constriction ever in its finances”.

In its sobering report Dealing with the Downturn; the NHS’ greatest ever leadership challenge, the Confederation says the impact of flat budgets coupled with the recession and rising costs means the NHS will likely face a real-term shortfall of £15 billion between 2011 and 2016, and that the health service will not survive the spending cuts unchanged.

But the report claims that the NHS can meet the tough challenges on the horizon if decisive action is taken now, and in his keynote address to delegates at the Confederation’s conference this week, chief executive Steve Barnett underscored the importance of strong leadership by NHS managers to help steer the service through funding difficulties and the difficult economic climate.

According to Barnett, the NHS is standing on the threshold the most challenging period in its history, and he claimed: “The cold, hard fact is that today we have just under two years to take radical action if our NHS is to remain true to its founding principle of excellent care, free at the point of need”.

NHS leaders must work closely with doctors, nurses and the general public to improve services he said, and pledged to address the “distortion” that managers are part of the problem, not the solution.

Growth in NHS spend will diminish from 2011, leaving the health service to juggle real-term cash cuts with increasing demand, which means that difficult decisions, such as what services to commission or staff to employ, will need to be made, Barnett said.

False economy?
However, the Confederation has warned against false economies such as the untargeted slashing of budgets and cutting back on training, as seen in previous times of hardship, as it claims these will only serve to increase costs in the end.

“It is really important that the significant improvements that have been made in the NHS are not lost through short term cuts and crude approaches to cost control,” stressed report author Nigel Edwards, Director of Policy at the NHS Confederation, and he claims that “quality improvements through greater efficiency and redesigning services can provide the budget savings necessary to navigate this crisis”.

According to the report, while management and infrastructure costs will need “rigorous scrutiny” the majority of cash streams through clinical decisions, and so a fundamental look at how the Service operates is necessary in order to tackle the looming budget squeeze.

In addition, it says there is significant opportunity to increase the efficiency of services, which will not only help to save money but ultimately drive up quality and safety standards and improve the patient experience, and it claims big gains could be reaped from a redesign of clinical services.

But the BMA has warned that the drive for greater efficiencies during the “dark and dangerous times ahead” could lead to a heavier reliance on the private sector to plug gaps in funding and services, which, it stresses, is not the answer.

Earlier this month the Association launched a new campaign to fight commercialisation of the health service, which aims to highlight the short-comings of market-driven reforms which, it has long-claimed, are not only wasting public money but are also having a negative impact on local health services and leaving many trusts with “crippling debts”.

Productivity on the rise
Meantime, a report by the Office for National Statistics shows that NHS productivity climbed 0.7% in 2006 and 1.2% in 2007, marking a turnaround from the previous seven years when productivity had been in decline.

The figure for 2007 is still more than 4% lower than that booked a decade earlier in 1997, despite a huge increase in the amount of cash sunk into the Service in the subsequent years.

Commenting on the figures, Edwards said: “A simple measure of inputs and outputs is not always the best way to judge how well health services are being delivered – quality matters too; however, it is gratifying to see that NHS productivity is continuing to rise”.