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26 October 2010

Why the NHS budget isn’t as safe as you think

The rate of health-service inflation means the NHS will suffer a real-terms cut of 5-6 per cent.

By George Eaton

The NHS is “the closest thing the English have to a religion”, Nigel Lawson famously remarked. With this in mind, it’s not surprising that the coalition has made much of its pledge to protect the health service from spending cuts. But does this cast-iron promise stand up to scrutiny? A new study by the independent King’s Fund suggests not.

The think tank points out that because the rate of health-service inflation is higher than in the economy as a whole, the government’s promise to protect NHS spending will be met only if economy-wide inflation measures are used.

Under the coalition’s plans, spending will rise by 0.1 per cent a year in real terms, but this increase will be wiped out by the cost of new drugs, medical technology and an ageing population, meaning that the NHS will, in effect, suffer a real-terms cut of 5-6 per cent.

The King’s Fund predicts that this will lead to a “funding gap” of as much as £6bn a year and longer waiting times for patients.

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Meanwhile, a poll by the same organisation suggests that doctors are yet to be convinced by Andrew Lansley’s expensive reforms of the service. Just one in four doctors believes that the white paper reforms will improve the quality of patient care; 50 per cent predict that it will prove impossible to maintain efficiency savings while the reforms are implemented.

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Philip Stephens’s warning that the Lansley plan is an “accident waiting to happen” seems prescient. The coalition should take note.