The cost of reform

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Asked in 1972 whether the French Revolution had been good or bad, the then Chinese Premier Zhou Enlai said that it was ‘too early to say’. As it turns out this was not an extreme example of the Chinese long-view – Enlai was apparently opining about events that happened four years previously – in 1968 – and not that other (somewhat more momentous) revolution that occurred more than 180 years earlier.

So, the coalition government’s reforms of the NHS: good or bad? As part of our review of the reforms of the NHS in England, The King’s Fund has argued that the changes introduced by the 2012 Health and Social Care Act led to a top-down reorganisation that has been damaging and distracting, structural change that is complex and confusing, and a new, fragmented system of leadership that is seen as a barrier to much-needed change in services – such as integration across care and organisational boundaries. In short, the reforms were likely to turn out to be a costly diversion.

But how costly?

The government estimates the total cost of the reforms to be in the region of £1.5 billion – mainly consisting of the financial costs of closing down abolished organisations, setting up new ones and making redundancy payments. But it is argued that this has been offset by cumulative financial savings from abolishing a managerial tier of the NHS and cutting the number of commissioning staff of nearly £5 billion over the parliament (and an estimated £1.5 billion per year thereafter).

Others have queried these estimates of both the costs (too small) and the savings (too big). And while estimating a net financial benefit from the reforms, the National Audit Office has questioned the detail of the government’s cost estimates.

Even with the net financial benefit, such organisational restructuring and reviewing of central budgets did not require the total reform or an act of parliament – the squeeze on funding would have been enough to ensure this would happen.

More broadly, whether the reforms have delivered improvements in productivity remains moot. As finances have tightened, the NHS has done well to generally maintain increasing trends in workloads. It is not surprising then that the latest figures from the Office for National Statistics suggest productivity across the NHS in the UK (not just England) for the three years 2010 to 2012 has improved by 1.6 per cent per year. This is more than the long-run average of 0.7 per cent – but is much lower than the 3 per cent to 4 per cent per year needed to close the funding gap.

What evidence we have on the costs and benefits of the reforms is patchy – some management costs incurred (and savings made), central budget savings (but with long-term costs?), increasing hospital activity (but signs now of financial strain as a result), an increase in productivity (but not enough and in any case occurring before the reforms were implemented) and some evidence that mortality has reduced (but to what extent attributable to the reforms?).

And there is the question of the opportunity costs – the value of the benefits that have been lost as a result of the changes. While scrapping PCTs has saved money, has this been without any loss in benefits? Similarly, has the loss of strategic health authorities and the establishment of the tripartite system leadership of NHS England, the NHS Trust Development Authority and Monitor been cost-free? Empirically it is hard to say, anecdotally the costs – such as lost and delayed focus on the main business of delivering health care – have not been insignificant.

This blog is also featured on the British Medical Journal website.


Barbara Bradbury

Halland Institute
Comment date
14 February 2015
From a purely observational standpoint, the latest health reforms have been extremely damaging. Large numbers of staff being downgraded has resulted in no short term savings (due to protected salary for a number of years) but enormous demoralisation amongst the workforce, with loss of highly skilled professionals at a time when the system is so short of many professional groups - doctors, nurses, radiographers, etc. The message such action gives out is appalling. Coupled with that, we have managers accelerating through the ranks with very little experience of management, causing huge damage to working relationships. They don't have followers but conscripts - people who do what they are told by heavy-handed managers, who don't speak out for fear of losing their job. Yes, modern day work environments are highly pressurised, with people often seeming to be required to manage a workload that once would have been covered by two people. But, hard work isn't the issue. Appalling leadership and management is. This starts at the very top echelons - government - and hits senior managers rapidly. When CEOs feel under the cosh by Ministers, it is a few short steps away from a stressed Board Room to defensive senior and middle managers. It is a paradox that, in a system where there is ever more metrics being gathered and reported, people working in the system do not observe a vast improvement in quality. So much is done to tick boxes - quantitative metrics. What has happened to quality?

Furthermore, the large numbers of agency and interim staff do not help - hindrance to continuity,lack of organisational allegiance, increased costs .... and constant fire-fighting for the substantive staff. It's no way to run a business, which is how we are being encouraged to view our public services.

Sadly, this pattern is being seen in other public sector environments, not just health. Clear parallels with education, to name but one.....

David Greenwood

Retired, voluntary worker,
Healthwatch North Somerset
Comment date
12 February 2015
I am a patient, far from the centre of anything. I ask "what reforms?" These "reforms" are games played at the 'top' i.e. in the DH and its upper bureaucracy with 'the medical professions'. The effect on patients is nearly always bad. Longer waits, always fewer hospital beds, services moved to places where access is more difficult and less of everything. HOW MANY TIMES HAS IT BEEN SAID THAT "WE SHOULD COMBINE HEALTH AND SOCIAL CARE? What has been done? NOTHING!!
Now the smart talk is about a Forward 5 year Plan. It's Rubbish. It won't happen! After the election next May if there is a change of government it's ten to one there will be another wrench of the tiller and away we will go on a new tack.
If only they would put the patient first. Meanwhile we must continue to use our aged community hospital (about 130 years) for ever. The plans were made, the shovels were poised to start digging when the wail came "It is too expensive. You can't have it." For a new hospital planned to cost £13million the then PCT spent £4millon on planning and had to compensate the builder over £500 thousand. Waste waste waste.
Don't think I'm cynical - I'm angry.

Misra Budhoo

consultant surgeon,
sandwell and west birmingham trust
Comment date
12 February 2015
I suspect that the instinctive thought that reorganisation does cost is correct - pause, detract, deconstruct, reconstruct etc. ultimately there is little evidence the mere restructuring provides for better services in any setting. There is no doubt that healthcare can be improved both in terms of cost and quality. Having the stomach for change and how to change is key. Always worth noting no strategic change works without microsystems working also changing. Otherwise the effects of strategy is silted up...

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