Health policy think tank The King’s Fund say a significant increase in funding for the NHS is necessary, to prevent a financial crisis.

There are still significant opportunities to improve NHS efficiency, for example by improving procurement and changing clinical practice, but with over a quarter of trusts already in deficit a financial crisis is now inevitable by 2015-16 or even sooner, with damaging consequences for patient care, it warns.

In a new report, the Fund highlights the progress made in improving efficiency in the face of the unprecedented slowdown in NHS funding since 2010. But, it points out, the main ways of reducing costs – holding down salaries, reducing the prices paid to hospitals and cutting management costs – are now almost exhausted.

The NHS budget is already under huge pressure, and this will be exacerbated further by the introduction of the Better Care Fund in 2015-16, which will divert a further £1.8 billion in funding to support joint working with social care.  

Looking longer-term and based on current projections, NHS spending as a proportion of Gross Domestic Product (GDP) will fall to 6% by 2021, its lowest level since 2003, the study says.

The report emphasises that new funding should not be used to disguise the need for change by propping up unsustainable services; rather, it should be used to:

- establish a health and social care transformation fund to meet the costs of service charges and invest in developing new models of care outside hospitals; and

- make emergency funding available to provide temporary support for otherwise sound NHS organisations experiencing difficulties as a result of the unprecedented pressures on their budgets.

It also says that NHS efficiency can be further increased by:

- a stronger national focus on collating and disseminating good practice in improving efficiency;

- more emphasis on encouraging doctors, nurses and other frontline staff to identify and lead changes in clinical practice;

- stronger leadership at a regional level to plan and implement changes to services across large geographic areas; and

- a more sophisticated approach to the way in which hospitals are paid and NHS organisations are incentivised to improve efficiency.

‘There is still scope to improve efficiency in the health service, and effort to release savings should be re-doubled. However, it is now a question of when, not if, the NHS runs out of money,” said John Appleby, chief economist at The King’s Fund.

“It is essential that politicians from all parties are honest about the scale of the financial pressures facing the NHS and initiate a public debate about the long-term sustainability of the health and social care system before, not after, the general election,” he added.