Page last updated at 05:57 GMT, Wednesday, 10 June 2009 06:57 UK

NHS 'faces huge budget shortfall'

By Branwen Jeffreys
BBC News health correspondent

Voice of NHS leadership says 'the health service in England won't survive unchanged'

The health service will face the most severe and sustained financial shortfall in its history after 2011, a report by NHS managers warns.

The NHS Confederation report says the health service in England will not survive unchanged, the BBC has learned.

Managers at its conference will be told they face an "extremely challenging" financial outlook.

Health Secretary Andy Burnham said NHS funding had tripled since 1997, putting it on a strong financial footing.

The report, to be published on Wednesday, warns any modest cash increases could be outstripped by rising costs within the health service.

This would leave the NHS in England facing a real-terms reduction of between £8bn and 10bn over the three years after 2011.

'Urgent action'

The cost of new treatments and the ageing population are two of the factors causing the inflation in the health service, the report says.

What 8-10bn can buy in the NHS: Family health services for 1 year; mental health services for 1 year; cancer treatment for 2 years; normal births for 27 years; prescriptions for 1.6 years.

The shortfall means a cut in staff numbers is unavoidable and it may be time for a cap on the budget for new drugs to be considered, it adds.

The confederation says urgent action needs to be taken to find innovative ways of making the service more efficient before the financial pressure increases.

Unions representing NHS staff are warning that short term cuts and increased use of private companies is not the answer.

The head of policy at the NHS Confederation, Nigel Edwards, said: "Having had seven years of plenty it now looks like seven years of famine from 2011 onwards.

"We are really going to have to think very deeply and carefully about everything we do and subject it to very rigorous scrutiny - and enlist all of our doctors, our front line clinical staff in rethinking the way we do things.

"This is a situation affecting health systems all across Europe as governments experience a mismatch of income tax and expenditure budgets.

"The NHS in Scotland, Wales and Northern Ireland face the same issues this report outlines for England and the whole system must make sure it is adequately prepared to keep providing a high quality of care to patients."

The confederation warns against previous strategies such as "slash and burn" indiscriminate savings, letting waiting lists grow or allowing health service pay to fall out of line with the rest of the economy.

Pull more funding from the NHS and we will be doing surgery in camping tents with pen-knives and vodka for anaesthetic
Dr Rufus Herring, Exeter

But it says it may be time to look again at the idea of putting a financial limit on what NICE can recommend to the NHS.

It says if the health service can not find solutions it could open the way to more challenging debates, such as the idea of limiting NHS care to a basic package that might exclude care such as IVF, homeopathy and elements of dentistry.

The budget for the NHS in England in 2010-11 is forecast to be just under £110bn, so the predicted shortfall between rising costs and the budget is substantial.

'Maximise efficiency'

The chief executive for the health service in England, David Nicholson, has warned the service that closing the gap could, in practice, translate into a need for efficiency savings of up to £15bn in the three years after 2011.

Health Secretary Andy Burnham admitted that the health service would face a "challenge" over the next five to 10 years - but said raising concerns of closures or job cuts was "completely premature".

He said: "The NHS is well-placed to deal with the tough economic times ahead. I will make it my priority to focus the NHS on prevention, quality and innovation.

NHS budgets

"That way it will be best placed to get the most out of every pound the public puts in and better placed to maximise efficiency."

Shadow Health Secretary Andrew Lansley said: "We are committed to real terms increases in spending on the NHS because as our population ages demand will increase.

"But if we are going to improve the quality of healthcare in this country we will need to make substantial improvements using current resources. The idea of getting more for less must apply in the NHS just as in any other public service."

Health service unions are concerned about what they believe will be a financially challenging period ahead for the NHS.

After years of significant expansion the NHS is unlikely to be able to simply grow to meet demand, raising the prospect of more difficult decisions ahead.

Both Unison and the BMA have expressed concern that a drive for greater efficiency could lead to greater use of private sector companies to provide NHS care.

BMA chairman Dr Hamish Meldrum, said: "The imminent funding crisis could be very dangerous for the NHS, and has the potential to seriously threaten patient services. We agree with the NHS Confederation that difficult choices will have to be made."

In Scotland any reduction in the NHS budget in England would be reflected by a reduction in the overall government budget under the Barnett funding formula. It will then be for ministers to decide whether that cut should be applied to the health service.

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