Face up to NHS budget foes


As rising costs and a tidal wave of public expectations push the NHS towards a new funding crisis, managers would do well to study the lessons history offers


This is the fifth NHS funding crisis with the same drivers - rising costs and increasing public expectations - since 1948. In managing this crisis, it may help to review the previous ones, which occurred in 1951, 1968, 1976 and 1987. After all, those who forget history are condemned to repeat it.

A crisis in NHS funding occurs approximately every 10 years, so the current one was due in 1999-2000, but was postponed by the promised rise in spending. Increased spending bought time but left the deep problems to be faced.

In the first crisis, spending increased 70 per cent, from £253m in 1948-49 to £400m in 1951-52, helped along by public expectations at the start of the NHS. But rising costs and public expectations soon collided with budget constraints. The NHS faced strong competition from the Korean War re-armament programme. The response of the Labour government was to freeze NHS spending at £400m and introduce prescription charges. In this case, however, the cost and activity pressures were weak and the crisis was not repeated for a long time.

The next crisis, in 1968, followed the 1967 devaluation of the pound. Chancellor Roy Jenkins was committed to making room for exports by cutting back public spending. The main casualty here was capital spending, through the postponement of the hospital building programme, and higher prescription charges. Later, the 1976 crisis, with Denis Healey as chancellor, saw a new round of reductions in capital spending.

The 1987-88 crisis was brought about more by rising expectations than rising costs. A tragedy caused by long waiting times for heart surgery at Birmingham Children's Hospital triggered a review that led to the introduction of the internal market and to a period of much faster growth in NHS funding.

Debate in previous years had brought to the fore the issue of the minimum funding required to keep pace with changing technology and an ageing population.

Today's crisis

The 2010 crisis follows a period in which both costs and patient expectations have risen strongly. These forces have increased spending, which is about to collide with the budget constraint. This is bound to happen eventually, given the infinite nature of medical demand and the limits to public resources that would emerge even without a recession.

An early move, as in the 1988 crisis, is to seek more activity from the supply side - a productivity miracle. However, at present, this productivity miracle has mainly an extracorporeal existence in the various quangos floating like barrage balloons above the NHS. The reality for the NHS is service scheduling, professional demarcations and now rising risk to staff reputations from quality standards, which are as laudable as they are uncosted.

All this makes any change in the traditional pattern a very difficult task indeed and one unlikely to have results in the short term.

All these funding crises have had the same causes, but the consequences for staff and patients have increased over time. The 1950 and 1968 crises were mainly at the political level. There was little sign of strong pressure for more spending and services at the local level. NHS staffing was less than half what it is today and there was much less media interest. The 1987 crisis showed a rise in tempo, with much wider involvement from patient groups and much more far reaching effort to change the supply side through the internal market.

The crisis of 2010 will be more far reaching still because there are higher public expectations, more programmes and the NHS is much larger. Our political leaders will have a natural inclination to ignore the unpleasant realities to come, but if we are to reduce the human and social cost it is essential to face up to them. The funding crisis is likely to lead to a covert rise in waiting times - rationing by stealth. In a service with rather rigid production systems and fixed funding, a 20 per cent increase in demand over five years is going to mean that queues return. The information revolution and more explicit quality standards will raise this crisis near the top of the political Richter scale.

The remedies lie in explicit priority for patients with serious illness, giving more power and responsibility to local managers and professionals for getting more value out of the immense health budget, and more choice and competition.