Over the last two years the leadership of the NHS has been
struggling to get used to a rapid change of direction. Even more
significant than the reform programme, the NHS has been trying to
come to terms with the 'Nicholson Challenge'.
The challenge, first developed in 2009, was to take £20 billion
out of the NHS in what was initially planned to be 4 and is now 5
years. This money was not to be given back to the Treasury but
recycled within the NHS to spend on the new demands for health care
that have been generated from new, and increasingly aging
The main reason this was so hard was because the previous 10
years had seen an increase in resources that in real terms had
doubled the amount of resource in the NHS. Developing restraint
after years of plenty is incredibly hard.
The entry of the coalition Government in April 2010 did not
change this equation for the NHS, but did for all other domestic
public expenditure. Public services outside the NHS faced real cuts
of 20%. The NHS was protected and would have a slight increase in
resources over the next five years.
This juxtaposition is important. Compared to other public
services the NHS does not face 'cuts' but is 'protected'. This
means that whilst the public is prepared and for economic reasons,
in favour of the cuts, the expectation within the NHS is that cuts
will not be necessary. However what 'protection' means is the
lowest five year period of growth in NHS resource since the
The way in which the Nicholson programme has been sold to the
NHS has been a 4-5 year programme of limited expenditure. The last
few weeks has seen this prospect change radically.
The Chancellor's autumn statement underlined all the other
economic news and left the nation with a recognition that the hard
economic times are here to stay for a lot longer than we might have
In the 5 years between 2009 and 2014 the average living
standards will decline by 7%. It may well be 10 years before the
average standard of living in 2008 will be reached again. Many
commentators will expect that this drop or at best freeze in living
standards will continue for some time into the 2020s.
I lay out these statistics to try and communicate that the times
we are currently living through and the near future is expected to
be much worse in terms of living standards than at any time since
the Second World War. Over the last 65 years we have become used to
improved living standards and expect them to continue, however we
know that this was unrealistic and that we are in for hard times
for some time to come.
So what might this mean for the NHS?
The danger for the NHS does not come from these economic
realities. The danger for the NHS comes from the belief that these
economic realities do not have a severe impact upon the NHS.
As long as we fail to recognise the long term impact on the NHS
of these economics, the NHS will be endangered. The sooner we all
wake up to the need for a very different set of economics and
resource use, the more chance the NHS has of sustaining a
The country is fully committed to the principle of a health
service which is free at the point of need with equal access for
all, paid out of national taxation. But very few people comprehend
the economic side of that political bargain. The nation can wish
the principle of a health service but it cannot wish the economics
to maintain that set of principles in the way in which we have done
If we fail to understand how this new economic reality with
impinge upon the NHS and make coherent plans for it, parts of the
NHS will suffer and its comprehensiveness for all will be
What does this mean in concrete terms?
For 60 years the value equation for the NHS has been
straightforward. The source of value for the NHS has come from
resources including clinical staff, their kit and drugs. If we
wanted more, to enhance our health care system we had to increase
the amount that we spent on these elements of value creation. Now
we need more health care for the aging population and we can't
afford the increased volume of resources that will provide
We must learn to use these resources more wisely, not just for
the period of the Nicholson challenge but for the decades to come.
This means all of those components of the current value creation
working being used differently and more effectively efficiently.
The big political issue that comes from that fact is that all of
those who do not use these value creators to the very best possible
level of efficiency will be putting a sustainable NHS at risk.
Of course this will take a while to digest. People will go on
thinking that there will be more money 'just round the corner' and
that the Chancellor will lavish billions of pounds into the
inefficient hospital fund.
Delivering a significant improvement to our health care service,
using the same level of resources will be extremely challenging,
but recognising that this is the only game in town way forward is
And let's be clear about the other side of the coin. People who
allow endemic inefficiency to continue are enemies of the NHS and
if they have their way, the NHS will fail.