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Brutal efficiency will be the next government’s defining challenge

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Labour have set the bar low for the battle over proposed investment in the NHS but, whichever party is in government from next year it will have to make severe efficiency savings

It is now clear what the defining challenge of Labour’s stewardship of the NHS would be should it win the next election. It will not be rolling back competition or driving health and social care integration – though both issues will figure. The defining issue will be meeting an efficiency challenge that makes the struggles of the last five years look like a walk in the park.

‘Miliband set the bar for the battle over proposed investments by other parties. He chose to set that bar low’

The Labour leader’s pledge of extra funding for the NHS was bound to set the bar for the battle over proposed investments by other parties. Ed Miliband chose to set that bar low.

Of course, any additional funds for the NHS are welcome – but the £2.5bn promised is unlikely to make much meaningful difference to a projected NHS annual funding gap of £30bn by 2021.

In his interview with LGC sister title Health Service Journal, Labour shadow health secretary Andy Burnham also acknowledged the taxes funding the cash injection would have to “build up”. So, while the intention to deliver an additional £12.5bn over the parliament is clear, there will be considerable devil in the detail.

Cushion taken away

We will have to wait until the first Labour spending review to understand what baseline the £2.5bn is to be added to. However, the likelihood is NHS spending growth will not reach levels maintained during much of the Thatcher years.

‘The theoretical potential for large savings is being salivated over by those influencing Labour policy’

Growth over the course of this parliament will be about 4% in real terms – but only because the Department of Health has released year end surpluses and inflation has proven to be lower than originally estimated.

We are already experiencing how this level of spending makes dealing with rising demand extremely difficult. The next government will not have the cushion provided by a previous decade of unprecedented spending or an emergency fund stuffed down the back of the DH sofa.

How will a Labour government – or indeed any new administration – attempt to square the circle? Expect much talk of savings from integrated care, greater use of technology and, from Labour, scrapping competitive tendering. Those making these claims will also know each idea is likely to increase costs before reducing it.

The government will be placed between a rock and a hard place – the call will once again go out to “tackle NHS waste” with a focus on how and what the NHS buys.

The coalition’s efforts on public sector procurement have had little effect on the NHS. Lord Carter’s review has yet to get going, though he may well be keeping his powder dry for the next government. The one noticeable win has been the rebate scheme agreed with the pharmaceutical industry.

Understanding the quasi-market

Labour will want – and is planning – to turbo charge the efficiency push. Already the theoretical potential for large savings is being salivated over by those influencing Labour policy. Some of those influencers work for major corporations, and their offer to help the NHS achieve a step-change in efficiency will test Labour’s avowed intent to use the private sector to drive “innovation” in the NHS.

‘Monitor’s future had looked decidedly rocky under Labour’

The Labour health team understand the mechanisms of the NHS’s quasi-market provide levers, such as tariff reform, which can give a hard edge to any efficiency drive. Hence Mr Burnham’s unlikely riding to the rescue of Monitor: an organisation whose future had looked decidedly rocky under Labour.

Mr Burnham praised the regulator’s “financial rigour” and clearly has it marked down as the system manager needed to drive NHS efficiency – a role Simon Stevens has made very clear he has no intention of NHS England fulfilling and one the regulated system was meant to make redundant.

The final irony is that Monitor, the supposed competition champion, could also be given the job of overseeing Mr Burnham’s idea of NHS organisations being deemed every commissioner’s “preferred provider”.

Alastair McLellan is editor of Health Service Journal

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