NHS faces crucial period ahead of reduced investment from 2008: but there's no cause for panic, says The King's Fund report

The government must take action now to reduce widespread variations in hospital performance, improve productivity and win the support of health staff in its efforts to reform the health service if the NHS is to cope with lower growth in funding from 2008 onwards.

A report, Funding Health Care: 2008 and beyond: Report from the Leeds Castle summit, published today by The King's Fund warns that these challenges will be among the most significant facing the health service over the next few years following this summer's comprehensive spending review (CSR), which is set to bring an end to the unprecedented increases in NHS funding since 2002.

The Chancellor is now expected to announce real terms cash increases in the next CSR of between 3.0 to 3.5 per cent per year for the NHS up to 2011/12 – less than half the annual increase received by the service every year since 2000. But the report argues that the slowdown in funding, despite coming at a time when the NHS is already facing significant financial problems, should not damage patient care and the delivery of better services as long as the NHS plans effectively for a period of reduced investment.

The King's Fund Chief Executive Niall Dickson said:

'Everyone knows the days of massive growth in health spending will come to an end from 2008. That is bound to be difficult but it should not be a cause for despair. The message from this report is clear – once the service is placed on a sound financial footing, the focus must be on improving productivity, tackling variations in performance and setting the right incentives for both staff and institutions. This will inevitably mean local organisations will need to develop a much greater understanding of the different needs of individual patients and for some organisations that will demand a very different approach to delivery.

'The unprecedented levels of funding the NHS has received in recent years have delivered real benefits in terms of lower waiting lists, more staff and better care in cancer, coronary heart disease and mental health. But much more could and needs to be done to improve patients' experience of care, clinical safety and health outcomes in general. That is why the next few years will be crucial if the health service is to have a viable, long-term future.

'As long as the government is prepared to continue to provide extra investment, and health organisations respond and plan effectively, there is no reason why the NHS cannot deliver more and better services in the years ahead.'

The report is the edited outcome of a high-level summit at Leeds Castle, attended by government officials, NHS managers, health professionals, economists and other leading policy analysts, and features chapters from a number of leading health commentators. The report reveals a consensus among the attendees on five key challenges the NHS will need to meet if it is to have a viable future:

  • Reduce variations in performance and clinical practice Substantial improvements could be made if health care organisations seriously tackled longstanding and unexplained variations in hospital and clinical performance across the country. It has been evident for many years that there are largely unexplained variations in referral and operation rates, treatment thresholds, prescribing rates, primary care trusts' spending decisions and performance in general. Failure to tackle unnecessary variations effectively has had an adverse impact on equity as well as on efficiency.
  • Improve productivity There is considerable scope for the NHS to improve productivity despite it facing a tighter financial future. Evidence of persistent and largely unexplained variations in performance across the NHS indicate there are productivity gains to be made, while system reforms such as payment by results and patient choice should encourage the service to seek out more productive ways of meeting patients’ health care needs.
  • Engage clinicians  Greater efforts must be made to involve doctors, nurses and other health care professionals in the management of the NHS. This should include devolving responsibility for spending decisions to clinicians and encouraging staff to generate more innovative thinking about improvements in productivity. The reform agenda will falter without the support of frontline professionals.
  • Measure what counts  The NHS should start as soon as possible to measure the impact of its services on the health of patients. This is essential to provide the information to help improve performance and productivity, make a reality of patient choice, and to give primary care trusts and GP practices the data they need to improve the purchase of care.
  • Design effective incentive systems  The NHS and health care professionals need to be given the right incentives to innovate and improve performance. Financial incentives, such as payment by results, will play a part but there is a pressing need to investigate other non-financial motivational factors. The report calls for more work to understand what motivates organisations and staff.

Report editor Professor John Appleby, chief economist at The King’s Fund, said:

'As the growth in NHS funding slows from 2008, but with demand and public expectations likely to continue to increase, getting more benefit from every pound spent on health care will become an urgent priority. If the NHS is going to deliver improved services and meet growing expectations it will need to get to grips with recent declines in productivity, the widespread and often unexplained variations in performance, and the underlying causes of financial deficits.

'It is also worth noting that in spite of this lower growth, spending on health care in the UK will still take an increasing share of national wealth – nearly 10 per cent of GDP by 2008, which is around the European average. There are reasons to be optimistic about the sustainability of the NHS and this report doesn't support those who predict the imminent demise of the health service, unable to reasonably meet demands. The next few years will be characterised by increasing turbulence and financial uncertainty as the government’s reforms continue to bite, but there is no reason why the health service cannot adapt to these changes and become more responsive and efficient.'

Read the report: Funding Health Care: 2008 and beyond: Report from the Leeds Castle summit

Notes to editors: 

  1. For further information or interviews, please contact the King’s Fund media and public relations office on 020 7307 2585 or 020 7307 2581. An ISDN line is available for interviews on 020 7637 0185.
  2. Funding Health Care: 2008 and beyond: Report from the Leeds Castle summit is free to download from 22 February 2007. The report features contributions from: Alan Maynard, Professor of Health Economics at the University of York and Chair of the York NHS Hospitals Trust; Robert Chote, Director of the Institute for Fiscal Studies; Andy McKeon, Managing Director of Health at the Audit Commission; and Mike Farrar CBE, Chief Executive of West Yorkshire Strategic Health Authority.
  3. The report is based on a summit held by the King’s Fund at Leeds Castle on 23 and 24 April 2006. The final report contains a definitive list of attendees (please note the list refers to attendees in the roles they occupied at the time of the summit). Among those attending the summit were:
    • Professor John Appleby, Chief Economist, King’s Fund
    • Sir Roger Bannister, Leeds Castle Foundation trustee
    • Dame Carol Black, President, Royal College of Physicians (now Chair, Academy of Royal Medical Colleges)
    • Professor Nick Bosanquet, Honorary Fellow, Imperial College of Science, Technology and Medicine
    • Sir Cyril Chantler, Chairman, King’s Fund
    • Anita Charlesworth, Director, Public Services HM Treasury (now at the Department for Culture, Media and Sport)
    • Dr Will Cavendish, Director of Strategy, Department of Health
    • Robert Chote, Director, The Institute for Fiscal Studies
    • Caroline Clarke, Finance Director, Homerton University Hospital Trust
    • Baroness Cumberlege, Senior Associate, King’s Fund and Leeds Castle Foundation trustee
    • Niall Dickson, Chief Executive, King’s Fund
    • Dr Jennifer Dixon, Director of Policy, King’s Fund
    • Professor Nancy Devlin, Senior Associate, King’s Fund and Professor of Health Economics, City University
    • Richard Douglas, Director of Finance and Investment, Department of Health
    • Nigel Edwards, Director of Policy, NHS Confederation
    • Mike Farrar, Chief Executive, West Yorkshire Strategic Health Authority
    • Dr Julien Forder, Project Lead for the Wanless Social Care Review and Deputy Director, PSSRU, London School of Economics
    • Jeremy Hurst, Head of Health Policy Unit, Organisation for Economic Co-operation and Development
    • Professor Julian Le Grand, Richard Titmuss Professor of Social Policy, London School of Economics
    • Professor Alan Maynard, Professor of Health Economics, University of York
    • Andy McKeon, Managing Director of Health, Audit Commission
    • Professor Carol Propper, Director, CMPO, University of Bristol
    • Jonathan Slater, Director of Health, Prime Minister’s Delivery Unit
    • Simon Stevens, President, United Health Group
    • Alison Tonge, Director of Finance and Estates, Stockport Primary Care Trust
  4. The government’s second comprehensive spending review (the first one was published in June 1997) will cover the years 2008/9 to 2010/11 and will take a ‘zero-based approach’ to assessing the effectiveness of government departments in delivering the outputs to which they are committed. The CSR for the whole of government expenditure follows a period of unprecedented growth in spending on the NHS in the UK, which has been growing at around 7.4 per cent in real terms since 2002.
  5. The King’s Fund is an independent charitable foundation working for better health, especially in London. We carry out research, policy analysis and development activities, working on our own, in partnerships, and through funding. We are a major resource to people working in health and social care, offering leadership development programmes; conferences, seminars and workshops; publications; information and library services; and conference and meeting facilities.
  6. The Leeds Castle Foundation is a charitable trust, set up in 1974 after the death of Lady Baillie. The Foundation maintains the property as a ‘living castle’ for visitors to enjoy but also hosts summits and conferences. We are grateful to Sir Roger Bannister CBE, the trustee responsible for medical conferences, for inviting the King’s Fund to hold this summit.