While the NHS efficiencies in Lord Carter's report are welcome, more fundamental reform is needed

Simon Stevens, Chief Executive of NHS England, stated in the Five Year Forward View that the NHS would face a £30 billion funding gap by 2020. Of this £30 billion, £8 billion is to come from increased funding and £22 billion is to come from efficiencies. Lord Carter of Cole has so far identified £5 billion by 2019-10 – a substantial start, but there is a long way to go.

There are certainly improvements to be made in the way the NHS delivers its services - they are far from as efficient as they could be, as outlined by Amyas Morse, head of the National Audit Office in 2010:

“Over the last ten years, there has been significant real growth in the resources going into the NHS, most of it funding higher staff pay and increases in headcount. The evidence shows that productivity in the same period has gone down, particularly in hospitals.”

So what are these NHS efficiencies?

Lord Carter believes that the £5 billion could be found as follows:

“I believe up to £2bn could be delivered by improving workflow and containing workforce costs. amongst other things, this includes increased productivity through having a stronger management grip on non-productive time (for example annual leave, sickness and training), better management of rosters and improved guidance on appropriate staffing levels and skill range for certain types of wards. I think a further £3bn could be delivered from improved hospital pharmacy and medicines optimisation, estates and procurement management (£1bn from each) by adopting best practices and modern systems for example, creating a tightly controlled single NHS electronic catalogue for products purchased by hospitals.”

NHS staff

The NHS employs 1.3 million staff with a 2013/14 pay bill of £45.3 billion. Small changes and marginal efficiencies in working patterns can save huge sums, indeed Lord Carter estimates that just a 1% improvement in workforce efficiency would save £400 million.

NHS Medicines

NHS expenditure on hospital medicines was £6.5 billion in 2012/13 and no-one would argue that every penny of this was spent as well as it could have been. There are certainly savings to be made. For example Bolton NHS Trust saved as much as £40,000 by only prescribing soluble Prednisolone (£1.50 per dose) to patients that absolutely needed that variety, prescribing the insoluble version (£0.02 per dose) to others. This is a small sum in terms of NHS budgets, but this is just one drug amongst thousands that are regularly prescribed.

NHS Estates

The TaxPayers’ Alliance has long argued that there are savings to be found in the way that the NHS manages its estates (see here and here). In our spending plan we argued that if all trusts managed their estates as efficiently as the top 25%, £3.6 billion could be saved by 2019-20.

Across the 22 trusts that Lord Carter studied, the estimated savings in estates were:

  • Cleaning: £10 million;
  • Energy £12 million;
  • Building & Engineering £12 million;
  • Laundry £4 million;
  • Waste £3 million, and;
  • Water & Sewage £1.7 million.

There is clearly scope for NHS trusts to learn from one another and a great deal of money to be saved. As previous Taxpayers’ Alliance research has shown, better management of NHS resources may provide substantial benefit.

NHS Procurement

Many hospitals do not have modern inventory management systems – they don’t know what stock they have and money gets wasted in buying duplicates. Lord Carter estimates that hospitals in England could save an average of £3 million every year if they brought their systems up to the standards set out in the NHS eProcurement strategy. For example, one London provider saved £200,000 over four months by employing a single supply chain expert. Such savings do add up and across large hospital budgets they amount to substantial sums.

Lord Carter’s interim report backs up years of TaxPayers’ Alliance research that there is room for savings in the way the NHS spends your money without even beginning to look at how it delivers patient care. Better planning of staff time, better procurement of medicine and equipment and improvements in how estates are managed might be small sums individually, but across the entire NHS budget of £115.4 billion in 2015/16, the savings are huge.

However, these changes are certainly no substitute for the kind of more fundamental reforms we have previously suggested. Our population is aging, health needs are becoming more complex, and the sort of year on year funding increases that were seen in the 2000s are simply not sustainable. In short, we need to find a new way to pay for healthcare.