NHS is on track to meet 65% of efficiency target by April, officials say

By April this year, the halfway point of the government’s four year £20bn (€24bn; $32bn) efficiency drive, the NHS in England is likely to achieve 65% of the efficiency savings expected of it, MPs have been told.

However, MPs on the parliamentary Public Accounts Committee have questioned the accuracy of this Department of Health prediction and raised concerns that only the easiest savings have been made so far.

The committee held an evidence session on 14 January as part of its inquiry into the NHS’s progress in making efficiency savings.

MPs asked how the NHS was doing in terms of meeting the savings expected of it. Officials from the health department replied that £5.8bn of savings had been made in the first year (2011-12) and that the figure was expected to rise to £12.4bn by the end of March, ahead of schedule.

The committee challenged the officials, saying that there seemed to be little evidence of service transformation or of real efficiencies, and instead there were more cuts to services and staffing levels.

David Flory, deputy chief executive of the NHS in England, giving evidence, told the committee, “We are ahead of where we planned to be and certainly ahead of where the original plans were.

“If you think of the overall number of £18.9bn, by the end of year two I expect that the savings that will have been made will be £12.4bn, which will be 65% of the way to the total number at that half point in time.”

Around 40% of that money, he said, arose from improved efficiency in service provider organisations achieved by various means, including greater productivity, less spending on drugs and agency staff, and reduced sickness absence.

The remainder came from transformational changes, nationally driven change, and pay restraint, he added.

However, the committee challenged the savings figure, saying that it did not truly represent productivity costs. One committee member, Stephen Barclay, the Conservative MP for North East Cambridgeshire, asked, “How accurate is that [£12.4bn] figure if the trusts are reporting those savings in different ways? Some are not including one-off costs.”

Flory replied, “It is gross of one-off costs.”

David Nicholson, chief executive of the NHS in England, also giving evidence, said that a number of “contentious” service changes would emerge over the next year as many more NHS organisations started to implement transformational change.

“You will see no shortage of people wanting to do transformational change over the next 12 months or so,” said Nicholson. “We are just coming into a phase now where there are quite a lot of fairly contentious service change issues surfacing.”

Mike Farrar, chief executive of the NHS Confederation, which represents most NHS organisations, also appeared earlier in the committee’s evidence session.

He said that the NHS had managed to achieve the savings expected of it in the first two years thanks to short term measures and pay restraint.

“What we worry about is that in order to meet that kind of 4% efficiency year on year [it] requires us to fundamentally change the way in which we provide those services,” he said. “So far, we have seen little evidence that we have, on a sustainable basis, achieved those savings. That is still to be done.”