BLAIR’S BRITAIN, 1997–2007
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still have to wait up to six months for a first appointment. There were also
long waiting times for non-consultant appointments, such as for digital
hearing aids where by 2007 there were 300,000 people on the waiting list,
with some waiting two years or more. Waiting times were also long for
less-popular or high-profile diseases such as mental illness and COPD
which were not affected by targets. For mental health there was still little
access to low-cost non-drug interventions such as cognitive behavioural
therapy.
Improved funding. One of the most significant commitments was to
improve NHS funding. In the 2002 and 2004 Budgets, the government
pledged to increase health expenditure by 7.4% a year in real terms
between 2002–3 and 2007–8. The Department of Health’s estimate is that
health spending will be 9.5% of GDP in 2007–8. If health spending were
to continue at the same rate of growth for two further years it would be
10.5% of GDP in 2010.
The GDP deflator, however, underestimates the true scale of NHS
inflation. It is the most general measure of price change in the economy
rather than a measure of the real resources actually available to local
10 OECD, OECD Economic Survey 2005, United Kingdom (Paris: OECD, 2005).
health services. A more realistic measure of such increases would deflate
by a change in NHS specific costs. The planned increase in funding ran
into a problem which had been predicted as early as 18 January 2000,
two days after the original pledge to raise spending to European levels:
‘Pouring more money into a monopoly provider such as the NHS simply
puts up costs because suppliers to the NHS will charge more.’11
Before 1999 the two indices were showing little divergence. From 2001,
however, they began to diverge and the NHS specific cost index rose
4–5% a year until 2004. Thus the increase was 4% a year in real terms
rather than 7% during the first period of the spending increase. In principle it would be possible to reduce the impact of these NHS-specific
changes by shifting expenditure to lower-cost inputs but in practice local
managers generally lack the flexibility to do this.
From 2001 to 2006 the NHS came to show a major problem of stagflation. The Keynesian remedy of a large increase in expenditure was no
longer chosen for the economy as a whole but still remained a key policy
within the public sector. There was a deep inconsistency in New Labour
between its perspective on the economics of the private sector and what
was regarded as the key priority for the NHS. In many areas the combination of large tax-funded expenditure increases with the central planning
of output was regarded as dangerous and completely outmoded. But in
the NHS this was regarded as the only feasible and effective way of organising the service.
The outlook to 2010 is for an increase in commitments against this
limited increase in real spending. In essence the commitments set out in
The NHS Plan will become very important claims on funding.
The old system of funding capital spends on a pay-as-you-go basis set
up a conflict between revenue and capital spending. Indeed, if the government had continued with the old system it would have been difficult
to increase revenue spending at the pace that has occurred. At least a half
of the real-terms increase would have had to be committed to the additional capital expenditure, even before allowing for the problems of
increases in development costs which were such a notable feature of
public sector hospital projects in the past.
The new PFI-based system, however, raises additional cost commitments for the future. These are particularly as a result of the repayments
on the capital, which are much higher than the capital charges on the
older buildings. In addition there are the costs of installing and running
11 Nick Bosanquet, ‘How to Save the NHS in 12 Months’, Daily Mail, 18 January 2000.
new technology in these hospitals, which on all international evidence
from the OECD and from the US are likely to be heavy. There may be
some offset to the cost increases if the new service providers can run services more efficiently, or replace retiring staff covered by Regulations on
Transfer of Undertakings and Protection of Employment with staff on
different contracts.
The main immediate impact of PFI schemes is likely to be through
higher capital costs which, in the initial period, are at least 15% higher.
Some of the early schemes have been able to reduce costs through refinancing in a period of falling interest rates, but this is unlikely to be an
option for later schemes which are likely to proceed during a period of
rising interest rates.
Beginning in 2007, the NHS faced the challenge of paying the annual
costs of these schemes. There will be some help from the fact that most of
these are fixed-price contracts while the total NHS expenditure will still
be rising. In the long term, with indexation generally only at the RPI,
these payments will be less onerous. By 2010, however, the NHS will have
to find £2 billion to cover the annual charges on the new PFI schemes,
some of which will be additional to current spending.
Evidence from the early PFI schemes at Norwich, Dartford, Carlisle,
Worcester and the West Middlesex in London shows that the coming of
local PFI schemes has also had short-term effects which were threatening
both to financial balance and to the Trusts’ ability to compete. The Trusts
are all facing serious deficits and their performance against targets for
waiting times has been poor. By 2007 the position had worsened. Of the
fifteen large schemes then in operation ten were rated as weak by the
Healthcare Commission for financial management and use of resources,
four as fair and only one as good. Most were rated as weak because of
their deficits.
At best the new hospitals face a running-in period when there will be
many management problems in new systems and equipment. Beyond the
initial period, however, they will face intense competition from
Foundation Trusts and from Treatment Centres which will have had
several years’ start and the chance to build customer relationships. The
new hospitals are likely to have higher costs at a time when the national
tariff and greater competition will be driving costs down. Large hospitals
may begin to look like battleships in a submarine wolf pack. They may
also face a situation of decline in referrals and admissions. Referrals
by GPs have already fallen in each of the last two years and the
additional workload has come from referrals between consultants within
the hospital system. For the future it should be possible to reduce referrals
and admissions through the new primary care contract and through
more integrated care.
The choice programme will probably have led to a reduction in waiting
times as has happened with cardiac surgery in th
e south-east where the
choice programme has led to the elimination of waiting times. The new
PFI hospitals will be seeking to cover higher costs in a situation where
demand has reduced and market power has shifted to the buyer. The PFI
principle as such was highly positive but it could be used in a more
modular, flexible way. The effect of central planning of the location of
hospitals was to leave the NHS with hospital costs which threatened
investment in the closer-to-patient services which were the preferred
model after 2002.
Between now and 2010 the NHS faces a round of new contracts – but it
has also had to deal with the full cost effects of increases in manpower
from earlier decisions on central planning. Among key areas of change
are:
Agenda for Change. This involved the regrading of the whole NHS workforce to provide a consistent set of differentials. The estimated cost is
likely to be around 0.5–1.0% of the wage bill in the first phases, with some
higher gradings being offset by the lower grading of support staff.
The new consultant contact. This has a running-in period when a new
incremental scale may come into effect giving higher returns to more
experienced consultants. The immediate increase in the salary bill is
likely to be about 10%, while the increase in career earnings is estimated
by the British Medical Association to be around 16%. In addition there
will be activity-based supplements for additional sessions.
Increases in staffing. More important for pressure on costs and expenditure will be the increased numbers of staff. Numbers of medical students
have risen by 50% and many will seek employment. The NHS total
staffing number is likely to rise by at least 40% by 2010 compared to 2000.
As The NHS Plan proposed: ‘The next few years will see a major expansion in staff numbers in the NHS. This expansion has to be sustained. The
increases we are making in training numbers will provide for further staff
expansion in future years.’12
12 Department of Health, The NHS Plan, p. 55.
These changes have come about before the increases in staff numbers
under The NHS Plan. There will be a 50% increase in the number of
medical graduates annually by 2010 and a 30% increase in the number of
nursing graduates. Even allowing for likely increases in staff turnover and
in retirements, there is likely to be a significant increase in the number of
doctors and nurses. Increases in these groups usually lead to increases in
supporting and technical staff. Unless numbers of funded posts continue
to rise, there would either be medical/nursing unemployment or lack of
adequate support at a time of expanding activities.
From 1999 to 2005 staff numbers rose by 25% and then began to show
a slight fall as the NHS came under greater financial pressure. Such
increases in staffing run the risk of cramping local initiative in service
development. They increase the cost base for local funders and reduce the
amount available for alternative suppliers. Thus any realistic development of pluralism will be difficult against this background of rising costs
of directly employed staff.
Such increases may also make it more difficult to fund the working
capital and infrastructure, which would allow staff to work more productively. The new staff may be frustrated by the lack of equipment and supporting systems. While most employers are reducing staff numbers in
order to ensure better support and investment in the use of staffing time,
the NHS is spending more on staff, mainly on lifetime employment
tenure.
The expansion will be particularly strong in groups with the highest
pay levels. Over the ten years 1993–2003, numbers of consultants rose
from 16,598 to 27,754 (an increase of 67%). There have also been rapid
increases in the number of nurses in high grades or consultant status and
in managers in the more senior groups. Over a period when it has
become more possible to carry out substitution with the use of less
highly paid staff, the NHS hospital service has swung towards higher
costs.
The pattern of staffing development has been very different in primary
care where there is less central planning and more local decision-making
on staffing. Over the period 1993–2003 the number of GPs rose by 9%
while the number of practice nurses rose by 30%.
Overall the increase in staff numbers will raise the relative costs of the
service. It is undeniable that there will be some gains in service standards.
The question is whether they could have been achieved at lower cost and
whether a different mix of staff and support might in fact have led to
larger gains in service standards.
Health inequalities. It had long been recognised that there are
differences both in outcomes and in access and these have continued.
Following a heart attack intervention rates were 30% lower in the lowest
socio-economic groups than in the highest.13
On some measures inequality has increased. Recently the Department of
Health has noted that the relative gap in life expectancy has increased by 1%
for males and 11% for females between 1995–7 and 2002–4. The relative
gap for infant mortality also increased. The infant mortality rate was 19%
higher than in the total population in 2002–4 for the more deprived group
of Primary Care Trusts (PCTs) compared with 13% higher than in the baseline period of 1997–9. Inequalities also widened in primary care. By 2005,
66% of the most deprived PCTs were more than 10% below the England
average for numbers of GPs – an increase from the position in 2002 when
48% of the most deprived GPs were below the England average.14
There was a significant transfer of funds, with some PCTs in deprived
areas getting a funding increase 50% higher than the average from 2005
to 2008: the challenge for PCTs was to target policies so as to make a real
difference to these inequalities. Similarly the government reiterated the
policies of adding private sector providers in deprived areas.15 It remains
to be seen whether this would be enough to make a difference.
Public health. For public health the Blair years will be remembered for a
great public success and some private regression. The success was the
restriction on smoking leading to a ban on smoking in public enclosed
spaces. The regression was in numerous indicators of lifestyle which were
well set out by the Prime Minister himself in one of his farewell speeches:
‘Obesity is rising rapidly. One in four adults and children in the UK is
obese and rising. The social effects of alcohol abuse are widespread and
worsening. An estimated 1.7 million people in the UK have type 2 diabetes. 10% of NHS resources are used to treat diabetics. This could
double by 2010. And it is avoidable.’16
The policy future was seen in terms of public–private partnership with
Jamie Oliver’s campaign on school dinners as a prototype. There was
13 Julian Le Grand, ‘The Blair Legacy? Choice and Competition in Public Services�
��, Lecture
to the London School of Economics, 2006.
14 Department of Health, Tackling Health Inequalities: Status Report on the Programme for
Action – 2006 Update of Headline Indicators (London: DoH, 2006).
15 Department of Health, Our Health, our Care, our Say, a New Direction for Community
Services (London: DoH, 2006).
16 Tony Blair, speech on healthy living, Nottingham, 26 July 2006.
some success in raising the consumption of fruit and vegetables by
children. The Prime Minister looked forward to ‘a vast untapped potential out there for still greater partnership between public, private and
voluntary sectors’. His hope for the next ten years was that the health
debate would shift so that it was about ‘prevention as much as cure, about
personal responsibility as much as collective responsibility, about the
quality of living as much as life expectancy’.17 The last three years of the
government in fact saw little sign of this shift as the day-to-day financial
problems of the NHS loomed large; but the future agenda was well
defined.
The agenda was also well set for reducing social exclusion in the future
with an emphasis on early intervention and personal support through
direct payments giving much more freedom to carers or older adults.
Under the Blair administration direct payment had been piloted.18 The
success in reducing child poverty was not accompanied by any distinctive
success with those groups that were hardest to reach. For example, the
chances of people with long-term mental illness in getting help with
housing or with returning to work showed little improvement, with 50%
still reporting they had received little help and 80% still being out of the
workforce. There was also little success to report in improving opportunities for children in care. As the Prime Minister said: ‘We need to be
frank. We are not yet succeeding. One in 10 children in care get five good
GCSEs compared to six out of 10 of other children. Only 6% make it to
higher education compared to 30% of all children.’19 The government
certainly deserved credit for bringing the concept of social inclusion to
the fore as a key policy aim, but there remained a very difficult challenge
for the future.