The claim

“So as a party and as a Coalition Government, we have made our choice: to cut the deficit, not the NHS.”
Health Secretary Andrew Lansley, Conservative conference, 5 October 2010

The background

With Andrew Lansley appearing before the Commons health select committee today (Tuesday), FactCheck decided to look at the challenges faced by the NHS under the new Coalition Government.

Before the spending review on 20 October, this website explained that despite the Government’s pledge to increase NHS funding in real terms, cuts were already being made across the health service.

NHS primary care trusts (PCTs) were cutting back on hip and knee replacements, IVF treatment and cataract surgery and reducing staff.

Now, to cut costs, at least one PCT is telling GPs they shouldn’t refer patients for non-urgent operations, while in Birmingham, GPs say they have been advised that there isn’t enough money available for patients to receive psychological therapy for conditions including depression and severe anxiety.

When Chancellor George Osborne made his announcement, he said the NHS would receive  a real-terms increase of 0.1 per cent a year – as little as he could have got away with if he wanted to meet the pledge.

A 0.1 per cent rise needs to be seen in the context of the previous decade, when six per cent real terms rises were the norm. And it’s argued by some that the “real-terms rise” announced by George Osborne doesn’t really stand up to scrutiny.

The analysis

Social care
Of the money awarded to the NHS, the Government has decided that £1bn will be spent on social care – for example, supporting people in the community so they don’t need to stay in hospital.

This is obviously a worthy cause, but social care is normally included in the local authority budget – and if the NHS budget is ‘raided’ in this way, it is more difficult to claim that health spending is rising in real terms.

House of Commons Library analysis for the Shadow Health Secretary John Healey says: “The effect of including and excluding this social care funding is shown in the table below. Including the funding is critical to the description of the settlement as a ‘real terms increase’; without it, funding for the NHS falls by £500m (0.54 per cent) in real terms.”

Professor Kieran Walshe, professor of health policy at Manchester Business School
, says: “It allows the Government to tick the box to increase funding in real terms, but that is meeting the commitment on paper, but not in spirit.”

NHS inflation
Another issue is the method the Government uses to work out future inflation in spending settlements. This is the so-called GDP deflator, which measures costs in the broad economy, rather than the specific costs (equipment etc) the health service faces.

Historically, NHS inflation has tended to be slightly higher than the GDP deflator.

With a pay freeze in place at the moment for NHS staff earning more than £21,000, the King’s Fund’s chief economist John Appleby expects NHS inflation to be broadly in tune with the GDP deflator. But the pay freeze only lasts until 2013, “and for the last two years, there must be some doubt”.

The margins are extremely tight. “Less than a 0.1 per cent error in the GDP deflator and you have wiped out the real increase.”

The House of Commons Library agrees. It says the rise in funding planned by the Government is “so small” that claims the NHS is receiving a real-terms increase depend on the GDP deflator forecasts being accurate.

“If these turn out to be even slightly higher than expected, the NHS will have to get more than the spending review amounts if the ‘real-terms increase’ pledge is to be maintained.”

NHS re-organisation
Then there are the other challenges the NHS will have to deal with. There is the re-organisation of the health service, with the abolition of strategic health authorities and PCTs and a new commissioning role for GPs.

Labour has accused the Coalition of breaking its word here because when the Government was formed it promised: “We will stop the top-down reorganisations of the NHS that have got in the way of patient care.”

But the Government could legitimately point out that it also said: “We will strengthen the power of GPs as patients’ expert guides through the health system by enabling them to commission care on their behalf.”

It could be argued that the re-organisation isn’t “top-down” because family doctors will be left in charge of the purse strings  – and people tend to have faith in their GPs.

But the changes will cost money. Prof Walshe believes the restructuring will cost up to £3bn and is sceptical it will bring any improvements to patient care. The Department of Health hasn’t come up with its own figure, but says cuts in management costs will save £850m a year.

Efficiency savings
The NHS has also been told to make £15-20bn of efficiency savings. The Health Department says the NHS is not going to have to spend less, but management costs will be cut so more money can be invested in frontline care.

Instead, the Royal College of Nursing claims almost 27,000 NHS jobs – among them doctors, nurses and midwives – will go over the next three years, although this is disputed by the chief executive of the NHS.

Peter Carter, chief executive of the RCN, says: “A huge range of services and jobs are earmarked for cuts against this urban myth that the NHS is being protected. The evidence is quite clear – that this is simply not the case.”

Looking beyond the debate over whether the NHS is receiving a real-terms rise, patients will have to get used to a service that is less flush than it once was.

The patient experience
Analysis by this website in October, before the spending review, showed that primary care trusts were cutting some of their services, including IVF,  hip and knee replacements, varicose vein treatment and cosmetic surgery.

Now NHS Warrington is going further – stopping GPs from referring patients to hospital for non-urgent treatment until next year.  This will affect admissions this month and December.

Warrington PCT has a shortfall of up to £8m. Nearby Bury has a deficit of £37m – the biggest in the country, according to Pulse magazine – although by the end of the year, the trust expects this to fall to £30m. It too is telling GPs to consider all possible alternatives to  hospital, although it has decided against following Warrington’s example, fearing a referrals backlog.

NHS Bury’s chief executive John Boyington tells FactCheck his organisation had expected a challenging financial settlement from the Chancellor. “Bluntly, most sensible NHS bodies were planning for little more than a real-terms increase. We weren’t expecting anywhere near the average of the last few years and were assuming the increase would be negligible, so it hasn’t affected our forward planning very much.”

Mr Boyington says his primary care trust is trying to save money by using GP surgeries for some services rather than more expensive hospitals.

In Birmingham, where a redesign of mental health services is taking place, there is confusion over whether GPs can still refer new patients for psychological therapy to treat depression and severe anxiety.

Family doctors say that because of cutbacks in the NHS, they have been told they can no longer make referrals, although this is denied by the three PCTs in the city.

It is a sensitive issue for the Chancellor, who promised in his spending review announcement that “we will expand access to psychological therapies for the young, elderly and those with mental illness”.

Dr Bob Morley, a British Medical Association representative for Birmingham, tells FactCheck that trusts are trying to cut their costs, but are hitting “vital frontline services”.

He adds: “They are looking for easy targets to make these cuts. A huge proportion of people we see in general practice have mental health issues.”

Birmingham and Solihull Mental Health Trust has written to staff saying their jobs are at risk and they could be made compulsorily redundant – following a decision by Birmingham’s PCTs to review its funding in March 2011.

Waiting times
Before the spending review, the Health Secretary Andrew Lansley scrapped the 18-week target from GP referral to hospital treatment and watered down the requirement that 98 per cent of patients are seen within four hours at accident and emergency departments. This has now become 95 per cent.

As Pulse has discovered, there has been a jump in the number of people waiting more than four hours in casualty in London. Board minutes from NHS London say: “Performance at week ending 26 September dropped to its lowest point (96.99 per cent) since January 2009, with 50 per cent of trusts performing below the previous standard of 98 per cent and two trusts below 95 per cent.”

But the latest figures from the Department of Health don’t show a statistically-significant rise in the numbers of people waiting longer than 18 weeks, although there has been an increase among those waiting longer than six and 13 weeks for diagnostic tests in the last year.

Only time will tell, but Prof Walshe believes waiting times are likely to rise to levels last seen in the 1980s.

The verdict

At the Conservative conference, Andrew Lansley said the Government had decided “to cut the deficit, not the NHS”. Two weeks later, the Chancellor announced the NHS would receive a real-term increase in funding of 0.1 per cent a year.

Some argue that as £1bn of the NHS budget will go to social care, the health service isn’t really receiving a real-terms rise. But even if we give the Government the benefit of the doubt here – on the basis that this £1bn will be spent in an area that sorely needs it – there are question marks over future inflation in the NHS.

As John Appleby explains, the rise in NHS funding is so small that if the inflation forecast proves optimistic, the Government’s pledge is called into question.

Then there’s the patient’s perspective. After years of largesse, the health service will have to economise, as it would have done if Labour had won the election. There’s no point in pretending everything will be rosy.

The Department of Health says management costs will be cut and frontline care prioritised. But it will be difficult to convince patients denied treatment, or waiting longer for it, that the NHS isn’t being cut.