23rd April 2009

NHS reports budget efficiencies

On 22 April, the Chancellor of the Exchequer announced that the Department of Health is contributing £2.3bn in additional savings, as part of £5bn efficiencies in spending across the public sector in 2010/11.

The Department’s revenue budget for 2010-11 is adjusted from £104.6bn to £102.3bn, but spending will nevertheless rise by 18% in this Spending Review period 2007/08 – 2010/11.

The NHS, alongside other public services is making these savings in response to the current economic conditions, and to implement Lord Ara Darzi’s vision of high quality, efficient services as set out in his review of the NHS - High Quality Care for All.

These savings will be delivered by a package of measures, which include:

Delivering savings as part of the Treasury led Public Value Programme – a programme looking to make efficiencies across the public service – which will enable the NHS to unlock savings of £500m by:

Building on the success of the first year of the World Class Commissioning programme – which is delivering more strategic and long term planning of local health services;

Extending and refining the Payment by Results tariff – where hospitals are paid for the work they do – to reward and drive both better quality and better efficiency; and

Rolling out new guidance and driving efficiency improvements in making better use of the existing NHS estate e.g. by introducing new benchmarking measures.

Increased efficiencies delivered by all these measures mean that the tariff prices paid for NHS work carried out will be built upon efficiency growth of 3.5 in 2010/11, compared to 3 in 2009/10.

Implementation of the Operational Efficiency Programme recommendations, ensuring that support services are cost effective, particularly on collaborative procurement, through the new Commercial Operating Model and on back office functions by building on savings already delivered through NHS organisations sharing back office functions, including payroll, finance and HR.

Ensuring that all central Department of Health and Strategic Health Authority held budgets are robust and deliver rigorously on value for money.

Money allocated to Primary Care Trusts in December 2008 to commission local health services for 2009/10, 2010/11 will not be affected. The NHS will benefit from an uplift of 5.5% for front-line services in each of these two years, enabling the health service to continue to drive improvements and seek better value for money for the taxpayer. Also as set out in December 2008, the NHS will also be able to spend up to £800m of its accumulated £1.7bn surplus over these years for the benefit of patients.

In addition, the Department will release back to HM Treasury its centrally held contingency. This contingency was created at the time of the 2007 Comprehensive Spending Review to provide a buffer against potential cost pressures and financial turbulence. However, a contingency surplus of over £1.7bn in 2008/09 means these centrally held contingencies can now be safely returned.

Notes to Editors

1. A more detailed update of how additional value for money savings will be made across public services will be published on the Cabinet Office website

(Source – News Distribution Service for Government and the Public Sector)