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Gold, incentives and meh

Budget axe brings £2.3bn a year cuts in health spending

By Steve Nowottny

The Department of Health will have £2.3 billion slashed from its funding next year as part of across-the-board public spending cuts announced in today's Budget.

In total the Department has been told to contribute £10.5bn to the Government's revised £35 billion ‘value for money' target.

PCT allocations will continue to rise by 5.5% in 2009-10 and 2010-11, with the Government insisting it is ‘maintaining the allocation plans for key front-line public services.'

But the Budget sets out a series of value-for-money savings the NHS will be expected to achieve as the full impact of the credit crunch hits the public sector.

Among the expected cuts:

- £500m a year through reductions in the average length of hospital stay, by preventing patients being kept in hospital ‘longer than necessary'

- £550m a year through the new Pharmaceutical Price Regulation Scheme

- £500m a year through improved commissioning processes, with the NHS tarrif to be extended into new areas including community services and mental health

- £100m a year through improving collaborative procurement and sharing of back-office functions

The Department of Health is also expected to save up to £100m a year in estate costs by 2013-14, with the rollout of new metrics intended to improve estate utilisation.

The Budget also reveals some further details about the Government's £100m commitment, first announced in the 2008 Pre-Budget Report, to upgrade 600 GP surgeries to training practices.

The Budget states that ‘targeted areas have now been identified' and says that PCTs will receive allocations next month, with work at practices to commence early in the summer.

In response to the Budget, the King's Fund's Chief Executive Niall Dickson said: ‘This is a wake up call for the health service - no matter who is in power from 2011 the NHS will have to manage with very low or no growth in its funding. We are in a serious recession from which the NHS cannot be immune.'

‘The health service will have to make additional savings of £2.3 billion in 2010–11 but this was already planned for so this year and next year will be relatively benign. The real message from the Budget is that from then on the NHS will have to be much more productive or make significant cuts in its services. Given rising demand a static budget will feel like a cut unless the NHS delivers more value for every pound it spends.

DH: will have to find a total of £10.5bn savings DH: will have to find a total of £10.5bn savings

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