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Health bill will save £2bn less than predicted, DH admits

The changes made to the health bill following the Government's listening exercise mean the reforms will save £2bn less than originally predicted, a new impact assessment reveals.

The Department of Health's revised impact assessment, the first gauge of the cost of the health reforms following high profile revisions to the bill, which was voted through by MPs yesterday, predicts that the reforms will result in commissioning savings of £8.6bn over 10 years. The new figure is £2bn less than the £10.6bn saving predicted by the DH's original impact assessment, published in January this year.

The impact assessment forecasts that long-term annual savings from 2014/15 will drop by £200m a year compared to the savings predicted prior to the bill's revisions and that the net savings during the transition to clinical commissioning groups between 2010 and 2015 will be up to £600m less than originally envisaged.

However, the new impact assessment also reveals that the transition to clinical commissioning groups under the revised bill will cost up to £200m less than originally predicted. The DH now estimates that the transition will cost between £1.2bn and £1.3bn, down from the £1.4bn forecasted in January's estimate.

The DH attributed the fall in transition costs to ‘reduced redundancy costs'. The report showed £195m was spent on staff redundancies in 2010/11, with a forecasted total of up to £989m to be spent on paying off 12,900 workers as the reforms are implemented in full.

The impact assessment arrived a day after the Health and Social Care Bill passed its third reading in the House of Commons by 316 votes to 251. A rumoured Liberal Democrat rebellion over the reforms failed to materialise, with just four of the party's MPs voting against the bill. The result means the bill will be debated in the Lords next month.

Health secretary Andrew Lansley said: ‘The revised impact assessment shows that the cost of modernising the NHS is only a fraction of the savings which will result.'

‘We are cutting waste and are still on track to reduce administrative spend by a third. Every penny saved will be reinvested into patient care, delivering significant long-term benefits to patients. Our plans, which have been strengthened by the listening exercise, will both safeguard the future of our NHS and move us closer to a health service that puts patients at the heart of everything it does.'

Differences in commissioning cost savings

An impact assessment published in January predicted £10.6bn savings in commissioning costs by 2019/20

The DH's new impact assessment predicts commissioning cost savings of £8.6bn by 2019/20

The new impact assessment shows the cost of transition to commissioning will fall