Editor’s blog Tuesday 14 December 2010: Select committee Report On Public Expenditure - "unprecedented" efficiency assumptions

The executive summary doesn't actually use the word 'heroic' about the assumptions being made on potential efficiency savings in both healthcare and social care by the Coalition Government's policy and financial planning.

However, that is the whole extent of the punch-pulling in this new Report On Public Expenditure.

Which is as it should be. It took the heath select committee under New Labour far too long to consistently probe the rotten areas of PFI, commissioning and management consultancy - though in fairness, they eventually got there with some of it.


The document does use the slightly-moderated 'unprecedented', though - repeatedly.

Committee chair and former health secretary (the once and future?) Stephen Dorrell righly notes in the press release, "Those figures represent a requirement for the NHS to deliver 4% efficiency gain, four years running. There is no precedent for efficiency gain on this scale in the history of the NHS, nor has any precedent yet been found of any healthcare system anywhere in the world doing anything similar.

“The requirement to deliver this result (which we refer to as the Nicholson Challenge) has been endorsed both by Andy Burnham before the General Election, and by Andrew Lansley since the General Election”.

The Big Social Services
The Report is likewise clear "that equivalent assumptions about efficiency gain underlie the closely related services provided by local authority social service departments.

Dorrell observes, “These assumptions about adult social services are important, both for the quality of service provided by those services to elderly and disabled people, and because it is widely accepted that when failures occur in adult social services, the burden falls on the NHS in the form of poor health outcomes, avoidable hospital admissions, delayed discharges and so on”.

With the publication today of the DCLG Spending Review delivering the bad news on cuts to many councils, this is not only correct policy analysis, it's great timing.

Calculations prepared for the committee by the Kings Fund examined the likely effect on Adult Social Care of two Spending Review commitments, and the Report notes:
o Although the committee sees the personal social services (PSS) Grant is as a welcome gesture, it notes the government has also – with widespread support – ended the ring fence around this grant. It concludes that there must therefore be uncertainty about whether local authority spending decisions will reflect movements in the PSS grant.
o The government also announced that £1 billion will be transferred from the NHS budget to social service departments to develop social care facilities. The committee describes this development as a “step in the right direction”, but warns that it is important to take the opportunity to make a step change in the interface between health and social care. It describes this requirement as “mission-critical to the successful delivery of the Nicholson Challenge.

Of this, Dorrell says, “Taking account of these concerns, and the 14% real terms reduction in total local authority expenditure anticipated by the Spending Review, the Committee concluded that efficiency gains of between 2.0% and 3.5% per annum will be required from social service departments to avoid the requirement for service reductions".

The press release adds that although the committee recognises that such improvements may be possible, it notes that the government itself described them as 'unprecedented', and thus the committee was therefore unable to conclude that councils could sustain care levels without reducing eligibility criteria.

The Nicholson Challenge
The committee reported itself to beimpressed by Sir David Nicholson’s recognition that it is not possible to “sustain 152 independent PCT’s between now and 1 April 2013” and his announcement that he anticipated existing PCT’s would form into clusters “both to enable them to devolve their responsibilities to local government and consortia and, on the other hand, to enable them to hold on the accountability chain, which is going to be so critical for us over this period”.

The Committee welcomes Sir David’s recognition of the need to “hold on to the accountability chain”; it believes this will be fundamental to the delivery of the Nicholson Challenge, and therefore to the delivery of the Spending Review. The committee was also particularly concerned about two other issues affecting the outlook for spending in the NHS:

o The committee believes it is important for the government to produce an estimate of the likely cost of its reorganisation proposals. It thinks it is unhelpful for the government to continue to use the figure of £1.7 billion which is the figure included in the NHS Operating Framework for 2010-11, which was published before the election of the current government.
o The committee is also sceptical about the government’s belief that 40% of the efficiency gain required by the Nicholson Challenge (i.e. £6-8 billion) can be achieved simply by reducing the tariff. Although the committee recognizes that opportunities exist for efficiency gain as the tariff is reduced, it is concerned that excessive reliance on this instrument will result in both quality reduction and crude cost shunting