Chancellor leaves it to trusts to fill £25bn Budget black hole

By Ian Quinn

Billions of pounds of NHS cutbacks were identified today by the Department of Health and Chancellor Alistair Darling, but his Budget left it to local trusts to find ways to fill the vast bulk of the £25bn black hole now confirmed as facing health services.

Before the dust had settled at Westminster from today's Budget, the last before the general election, the Department of Health revealed it had agreed to purge its spending by £4.35bn by 2012/13 as part of its contribution to slashing central Government spending.

It confirmed huge cuts to the NHS IT database, a sweeping crackdown on NHS staff taking time off sick and a review of NHS estates which opponents fear will be translated as a major sell-off of hospitals.

Public sector pay deals, including those for GPs, will be capped at a 1% maximum for 2011-12 and 2012-13, saving a total of £3.4 billion a year.

While the Budget makes it clear that 95% of NHS spending will be ring-fenced to rise with inflation in 2011/12 and 2012/13, which the Government claims will safeguard frontline services, the remaining five per cent is under threat.

The Treasury confirmed that the ring-fencing would apply only to ‘the 95 per cent of near-cash funding that supports patient care'.

The Chancellor made it clear that the big decisions were to come at local level, starting with the vast round of PCT and SHA operational cutbacks currently being finalised for 2010/11.

The Budget says it will be down to NHS organisations to trusts to deliver efficiency savings of between £15-£20bn by 2013-14.

‘These savings can only be translated into reality by local NHS organisations, so will be challenged, tested, refined and supplemented as the NHS develops its local plans,' it reads.

Health secretary Andy Burnham said: ‘The NHS budget is in a strong position after a decade of record investment.'

‘I am pleased that today's Budget locks in that growth, guaranteeing that frontline NHS funding will rise with inflation in 2011-12 and 2012-13. As a result of this funding, the NHS is today more resilient, has more capacity and provides better care than ever before.'

But his department was meanwhile announcing swingeing cuts including:

• Up to £555m which it says can be saved by clamping down on staff sickness.

• £100m to be saved by scaling back the National Programme for IT as part of a £600m reduction in ‘lifetime costs' announced in December

• Up to £1.5bn cut in procurement spending

• Up to £70m will be saved from more efficient use of NHS estates

The wider health cuts to be made by PCTs are expected to include:

• £3.5bn through raising staff productivity

• £2.7bn by reducing emergency admissions, increasing self0care and cutting spending on community services

• £2bn through slashing management savings and ‘more efficient' use of the hospital estate

• £1.5bn through more effective commissioning and reducing ‘unnecessary referrals and prescriptions' and cutting spending on trust's mental health services

Professor John Appleby, chief economist at The King's Fund, said: ‘Today's Budget confirms what we already knew - that despite a small rise next year, NHS spending will be frozen in real terms for the foreseeable future.'

‘Our analysis has shown that the NHS will face a £21bn productivity gap by 2013/14. Although this could be reduced to £14bn by looking again at assumptions about future spending in some key areas, closing this gap would still require productivity gains of around 3-4 per cent a year.'

An ONS survey on productivity in the NHS today showed that productivity dropped by 3.3 per cent between 1995 and 2008.