As promised, the National Health Service was largely protected from Chancellor George Osborne’s spending axe yesterday as he handed out an above-inflation annual budget rise of 1.3%, but fears over whether it is enough to sustain operations remain.

Overall, NHS funding is set to grow by £10bn to £114bn over the next four years, but this equates to just 0.4% growth in real terms over the spending review term (until 2015), and includes a 17% cut in capital spending and a 33% reduction in the administration budget, with the latter alone pegged to save £1.9 million.

While the NHS can count itself ‘lucky’ to get any rise among the deluge of cuts elsewhere, the magnitude of the rise is nowhere near that which has been seen over the last 12 years or so, and there are serious concerns that, with an increasing demand on resources from factors such as an ageing population, services will buckle under the pressure.

The coalition is sticking with the previous administration’s call for the NHS to find annual efficiency savings of up to £20 billion over the next four years, which, it says, will be reinvested to meet this surging demand. But to achieve this some service cuts are inevitable.

Going forward, the DH said it is focusing on boosting workforce productivity and applying best practice throughout the NHS in the management of long-term conditions, alongside the government’s huge programme of health reform that will see an overhaul of many areas of the current system, such as the introduction GP commissioning, to create a long-term sustainable health service.

Casualties within programmes promised by the previous Labour government include one-week urgent cancer tests and one-to-one care for cancer patients, as well as the expansion of free prescription entitlements for people with long-term conditions, which is likely to reignite the postcode debate as the prescription charge has been scrapped altogether in Wales and is soon to be abolished in Scotland.

However, despite the funding shortfall, the DH insists that the health settlement will allow the NHS to “maintain the quality of services to patients” in future and could even improve the picture in some areas.

For one, it provides extra investment to support social care, rising to £2 billion per year by 2014-15, including funding for reablement, which, according to the DH, “has shown dramatic benefits in helping people to regain their independence after a crisis and cutting emergency readmission to hospital”, and it also promises real-terms growth in health research spending to drive innovation.

Commenting on the spending review, Health Secretary Andrew Lansley said the NHS budget “will have to stretch further than ever before in these difficult times”, but noted that “reform isn't an option, it's a necessity in order to sustain and improve our NHS”.

‘Cocktail of pressures’

But reaction elsewhere has been largely foreboding. Nigel Edwards, acting chief executive of the NHS Confederation, said that “even with this settlement, the NHS faces a potent cocktail of pressures and we will have to work very hard to ensure the impact on services is minimised”.

Dean Arnold, lead partner for healthcare at Deloitte, warns of “significant risk” that the NHS will not be able to live within its reduced means during the transition period. “It will be paying extra to implement significant change and will not have new strengthened demand management in place,” he said, pointing out that “even now before the settlement has been announced the NHS financial position is deteriorating”.

According to John Appleby, chief economist at The King’s Fund, while the increase in health spending meets the pledge to protect the NHS budget, “an increase of 0.1% a year in real terms will soon be swallowed up by cost pressures such as incremental pay drift and the increase in VAT, [and] the net result will be a reduction in the NHS’ purchasing power”.

And the British Medical Association’s Hamish Meldrum applauded the government for keeping its pledge to protect health spend, but said the Chancellor’s remarks about productivity are “worrying”.

“In the last decade the ‘productivity’ of healthcare staff has contributed to reduced waiting times and improvements in the quality of patient care, [and] if the government is truly committed to reducing waste and inefficiency, their proposals for NHS reform should focus less on competition and more on a cooperative approach on delivering healthcare,” he argues.