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NHS facing real terms funding cut, think tank warns

By Lilian Anekwe

The NHS faces an unprecedented challenge of increasing demand coupled with a real terms funding reduction over the next four years, according to a new analysis by one of the key organisations tasked with implementing the NHS overhaul.

The Nuffield Trust, the independent health and policy think tank that has been asked to draw up the funding formula for GP consortia, warned in an analysis of the Government's Comprehensive Spending Review that dwindling NHS finances could lead to the failure of the Government's NHS reforms.

The NHS will receive a 0.4% real terms funding growth over the next four years to 2014/15, down hugely from the average real terms increase of 5.7% seen in the NHS from 1997/98 to 2009/10.

But the Government announced in the Comprehensive Spending Review that £1 billion a year of NHS funding will be transferred to social care. When this is accounted for, the Nuffield Trust's analysis found health funding will actually fall by 0.5% in real terms over the next four years.

In addition, accumulated underspends known as end-of-year-flexibilities have been abolished, placing extra pressure on NHS finances that will have ‘profound implications' for health, the Nuffield Trust said.

‘Since 2008/9 the DH has specified to the NHS that it must not spend its full resource allocation in each year. The NHS had £5.5 billion of cumulative under-spends at the start of this financial year and it is planned to make a further under-spend of around £1 billion in 2010-11. The spending review announcement means that none of this money will be returned to the NHS, in effect a retrospective cut in spending plans.'

Dr Jennifer Dixon, director of the Nuffield Trust, said: ‘The lessons from similar reforms in the past show that such approaches take time to develop and require significant management resource.'

'There is clear evidence that organisations distracted by reform can experience major financial and service failure. Failure could come in several forms, including a lack of control of expenditure, rushed service changes, or more fundamentally a decline in the quality of care, so it will be important to monitor and safeguard quality as a high priority.'