Health Policy Debate
28 March 2006
The political economy of system reform
Just when it seemed things couldn’t get worse for the NHS, the true extent of the deficit was revealed and the press began to report redundancies [Go to note 1]. The Royal Free announced it would shed 480 posts to save £25 million [Go to note 2], joining others in Stoke, Cornwall, Plymouth, Sidcup and Wolverhampton [Go to note 3]. The Conservatives predicted between 15,000 and 20,000 job losses this year [Go to note 4].
BBC’s Panorama programme on NHS finance (on the 26th March) gave the impression of an innumerate Department of Health reaching into a pile of cash to pay for badly formulated, uncoordinated and poorly-costed initiatives. Bob Dredge, who used to be in charge of financial reform at the DH, said he wouldn’t have been so generous with the consultants and would have paid more heed to output and efficiency. Professor John Appleby said that if forced to point the finger of blame it would have to be at the Department of Health which create the incentive environment for providers and targets based on demand. Professor Alan Maynard said the government are now back where they started in 1997, a circular journey achieved “at great cost”.
April the 1st will see the end of a miserable financial year for the NHS and the start of Payment by Results (PbR) as the chief basis by which health providers receive funds. If PbR is set to compound problems, shouldn’t it be suspended until the problems can be sorted out?
Simon Stevens thinks this would be the wrong thing to do. ‘We are where we are because performance management has stopped working, not because system reform is biting’ [Go to note 5]. In the Times, Nigel Hawkes agreed: ‘stopping the reforms now would be the worst possible outcome, even though they threaten greater instability. It would mean no chance of greater efficiency or the better use of resources’ [Go to note 6].
Even Polly Toynbee noted that ‘few experts think there is any point in turning back now’ but as she says ‘even fewer still dare predict the outcome as the new market tests the NHS almost to destruction’.
On Radio 4’s Any Questions, former health secretary Kenneth Clarke said that nobody had any detailed idea what system reform would do to services and that Patricia Hewitt was kidding herself by pretending NHS finance presented no real difficulty. He said the real problem was the lack of coherent explanation of reform. This remains a key challenge for the government, a lack of willingness to openly explain the thinking behind reform – that competition is intended to shake up provision and will lead to redundancies and some service closures. The government could reassure the public that professionals made redundant will most likely not become unemployed, but move to other posts. The government needs to articulate, defend and win support for its economic thinking.