MEMORANDUM
BY THE
BRITISH MEDICAL
ASSOCIATION (PEX 18)
ABOUT THE
BMA
1. The British Medical Association (BMA)
is an independent trade union and voluntary professional association
which represents doctors and medical students from all branches
of medicine throughout the UK. With a membership of over 140,000
worldwide, we promote the medical and allied sciences, seek to
maintain the honour and interests of the medical profession and
promote the achievement of high quality healthcare.
2. The BMA welcomes the opportunity to contribute
to this inquiry and to consider the service impact in the short
and medium term of the decisions being taken in the current public
expenditure process. Although guaranteed growth in health spending,
in real terms, has been promised by the Coalition government,
this is likely to be minimal and efficiency savings will still
have to be made. The Health Select Committee's inquiry is timely.
NHS SPENDING
3. Increases in real public spending on
the NHS have, since its inception, averaged around 4% per annum.
Over the more recent past they have been substantially higher
(in excess of 6% pa over the period 1997-98 to 2007-08) fuelled
by the Labour government's acceptance of the recommendations of
the Wanless report.[21]
Although the Coalition Agreement guarantees increases in real
terms throughout the current Parliament, these are unlikely to
amount to more than a little above inflationary pressure. The
actual (cash) increase will depend on the measure of inflation
used, and the real increase on the extent to which the latter
matches health service inflation.
4. Forecast inflation to the year 2014 will
average 2.1% per annum as measured by the Consumer Price Index
(CPI—the government's preferred measure) and by 3.1% as
measured by the General Index of Retail Prices (RPI). In both
cases, the highest rate is expected to be experienced in 2011
(Table 1). The government may however prefer to base its pledge
on its own CPI inflation target of 2% per annum in which case
the cash increase in NHS resources might be close to this figure.
The previous administration chose to favour current spending within
the NHS budget and there will thus be scope for the increase in
cash revenue spending to be greater than 2% at the expense of
capital expenditure.
TABLE 1
MEDIUM TERM FORECAST RATES OF INFLATION (%)[22]
| | |
| | |
| Measure of Inflation | 2010
| 2011 | 2012 |
2013 | 2014 |
| | |
| | |
| CPI | 2.9 | 2.4
| 1.8 | 2.0 | 2.2
|
| RPI | 4.2 | 3.4
| 2.7 | 3.0 | 3.2
|
| | |
| | |
| Source: ONS and HM Treasury. |
| | |
| |
| |
| | | |
5. Inflation in the NHS is typically higher than background
inflation largely, though not exclusively, as a consequence of
the proportion of health spending accounted for by pay. The government
has recently announced a pay freeze for health service employees
and contractors for the next two financial years with the exception
of those earning under £21,000 per year. However some increase
in pay bills over and above this can be expected from incremental
and other pay drift and the 1% increase in employer NIC from Aril
2011, announced in the emergency budget. Depending on movements
in the price of bought-in services and medicines and other equipment
and disregarding the impact of a relative fall in capital expenditure,
there remains a possibility that NHS inflation could therefore
be sufficiently high as to match or even exceed the cash provision
made for the service, resulting in a real reduction in resource
despite the Coalition Agreement's assurances.
DEMAND PRESSURES
6. The Wanless review in 2002 identified heath demand
pressures of between 3 and 4% per annum over the period covered
by the forthcoming Comprehensive Spending Review.[23]
These estimates were for its fully engaged scenario and would
be higher if progress were no more than solid and higher still
if it were slow. It is also separately estimated that real increases
of 1.0 to 1.5% per year are necessary for the NHS to provide the
same level of care to an increasing and ageing population.[24]
7. A relatively flat NHS settlement will therefore generate
a substantial gap between demand and resource provision and this
has been estimated at between £15 and £20 billion over
the period to 2013-14. The government proposes that this gap be
bridged by efficiency savings.[25]
Since this announcement, the White Paper Equity and excellence:
Liberating the NHS has been published. In this, plans to reduce
management costs by more than 45% over the next four years are
outlined, along with proposals to cut the number of NHS bodies
and quangos. It is not clear whether the savings from these proposals
are included in the efficiency savings target or are additional
to it. The costs of the proposals in the White Paper may in themselves
be considerable and will, in any event, be front loaded so savings
will not accrue immediately. The BMA has significant doubts about
whether the efficiency savings sought are achievable without damage
to the very services they are designed to protect, and further
concerns about the wisdom of implementing far-reaching reforms
to the NHS in the current funding climate.
8. The White paper suggests that the NHS will also employ
fewer staff by 2014—although it states that frontline staff
will be protected. The average annual increase in the UK medical
workforce between 1951 and 2007 was 2.7%; however the average
annual increase since 2001 has been higher at 4.4% per year—a
deliberate expansion to meet the demand pressures identified by
Wanless, as well as his forecasts of a potential shortfall in
doctor numbers relative to this demand in the longer term. BMA
workforce modelling suggests an average annual increase in medical
workforce supply of 2.7% to 2020 ie close to the long term average.
Failure to utilise these doctors properly would represent a significant
waste of resources.
IMPACT OF
EXPENDITURE CUTS
ON SOCIAL
CARE
9. The Institute for Fiscal Studies has examined potential
scenarios for public spending to 2014-15, and has concluded that
if the NHS is protected to the extent of no real growth and if
spending on schools and defence were to be cut by 10%, unprotected
departmental expenditure limits (DEL) would need to be reduced
by 33% over this period. This could be reduced to 25% if savings
of £13 billion could be made from annually managed expenditure
(AME) ie welfare payments.[26]
10. The impact of cuts of this magnitude on social care
would be enormous and the effect on the NHS of the consequences
could be considerable. One effect could be to increase the numbers
accessing the most expensive parts of the NHS—acute hospitals-
and remaining there longer whilst awaiting community services.
The direct effect on health status of reducing community services
allied to the impact of reduced welfare support as AME is controlled
will exacerbate this.
September 2010
21
Securing our future health: taking a long-term view: Final
report. Derek Wanless. London, H M Treasury. April 2002. Back
22
Forecasts for the UK Economy: A comparison of independent forecasts.
No 280. London, HM Treasury, August 2010.http://www.hm-treasury.gov.uk/d/201008forcomp.pdf Back
23
Securing our future health: taking a long-term view: Final
report. Op cit. Back
24
Appleby J, Crawford R, Emmerson C, How Cold Will It Be? Prospects
for NHS funding 2011 to 2017. London: The King's Fund/Institute
for Fiscal Studies. July 2009. http://www.kingsfund.org.uk/publications/how_cold_will_it_be.html Back
25
The year: NHS Chief Executive's annual report 2008-09.
London, Department of Health. 20 May 2009. http://www.dh.gov.uk/prod_consum_dh/groups/dh_digitalassets/documents/digitalasset/dh_099700.pdf Back
26
Crawford R, Public services: serious cuts to come. London,
Institute for Fiscal Studies. 23 June 2009. Back
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