Why do NHS deficits seem to have come as a surprise to those in power? Even the unprecedented largesse of the past few years was bound eventually to be strained by the splurge on extra staff, equipment, better pay and new hospitals built under the Private Finance Initiative — which officials are now worrying they cannot afford. We report today that PFI schemes in Plymouth and Hillingdon are being delayed, as are the plans for Barts and the Royal London.
It seems a bit rich to blame the doctors for all these troubles. There is no doubt that GPs and consultants shrewdly negotiated better contracts for themselves during the years of plenty. According to the Treasury, British GPs now earn almost twice as much in real terms as their French counterparts, and more than three times that of their brethren in Italy — quite a turnaround. But it was the Department of Health that fatally underestimated the real cost of those contracts, and then failed to crack down on spending elsewhere in the system. Yesterday the British Medical Association complained to the independent pay review body about what it sees as the Government trying to undermine the GP contract, by urging a rise for doctors below that of other staff.
The new figures do not necessarily mean that doctors are “overpaid”. But they do explain why the Treasury is now calling, rather late in the day, for a dramatic improvement in productivity. The great irony is that the pay problems stem directly from the Department of Health’s failure to appreciate how doctors worked in the first place. The new consultants’ contract turned out to be more generous than intended partly because officials had refused to believe that consultants were working the long hours they claimed — they seem to have assumed the claims were merely BMA propaganda. The BMA’s propaganda was effective, but, in this case, it was rooted in fact.
Health officials rightly sought to link remuneration more closely to performance when negotiating the GPs contract. But they set the bar too low, introducing “quality points” that included such basic tasks as keeping proper records. The department budgeted for GP practices achieving an average quality score of 850 points last year, but the figure ended up being closer to 1,000, adding about £200 million to the wage bill. A performance pay system that awards the maximum to almost everybody, while taking up considerable amounts of staff time in ticking boxes, is deeply unsatisfactory.
Economies are now being sought, but it is very late in the day. The Government’s policy of using its bulk purchasing power to buy drugs more cheaply has already started to generate efficiencies and will generate more. But with health investment due to slow in 2008, this is unlikely to close the gap in a health service that is still largely unreformed.
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The think-tank Reform has estimated that the NHS could be running a deficit of nearly £7 billion by 2010 — including savings produced by efficiency gains. The Government has argued that there is much greater scope to reduce costs. But it looks almost inevitable that the NHS will not be able to take on as many additional staff as planned. This fundamental failing indicates that the cost of doctors was not the only miscalculation by the Government. The cost of the squandered investment will be borne by patients and, electorally, by the Labour Party.