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UK Public Service Inefficiencies Rise with Spending (Dec 2005)

Reform, a leading independent UK think-tank has recently reported that Public spending increases since 1999-00 have reduced productivity and increased inflation. Based on a survey by ICM they also state that "most voters believe that the extra resources given to public services have not been used effectively. Nearly two thirds believe that the extra spending has not delivered real improvements in the NHS and a majority believe that extra education spending has not greatly improved state schools.“


NHS spending, now above the EU average, is highly inefficient. The independent health research charity, the King’s Fund, recently showed that of the £5 billion spending increase on the NHS in 2003-04, three quarters was absorbed in higher costs. On 19 October 2004, the Office of National Statistics produced figures from the November 2004 Atkinson Review team showing falling NHS productivity, of up to 1 per cent per year since 1997.  This estimate is based upon over three-quarters of all NHS activity.

The report by Sir Tony Atkinson, Warden of Nuffield College, Oxford stated that spending on the NHS has increased by 40 per cent in real terms over five years and that while the longest hospital waits have been eliminated, the average wait is little changed at just over 10 weeks. The trend in falling death rates from cancer and heart disease was already established in 1980, well before the current programme of spending increases began in 1999.
While the numbers of doctors and nurses are increasing, the number of NHS managers is increasing three times as quickly. The report notes that the scale and speed of the NHS spending increases has been economically damaging because they have been funded by taxation, weakening incentives and so reducing economic growth in the long term. Also they have transferred resources from the high productivity private sector to the low productivity public sector.
 
The NHS, third largest employer in the world after the Chinese Army and Indian Railways, is intrinsically bureaucratic. It both funds and provides healthcare. As a result medical professionals are beset with political targets and central direction, distorting clinical priorities and preventing innovation. On the other, the purpose of the NHS is to improve the health of the nation as a whole rather than to meet the needs of individual patients. A huge bureaucracy is needed to prioritise one set of patients over another.
 
The accountability of the NHS is still to the centre rather than to local managers or to patients. Under the Public Service Agreement of the Department of Health, the Secretary of State for Health is accountable for the performance of the service. The Department of Health has 12 targets which it agrees with the Treasury and for which the Secretary of State for Health is responsible. The Department of Health then sets targets for the NHS to meet. In 2004, individual acute trusts faced 9 "key targets" and 36 'indicators' under the Department's performance rating system. Primary Care Trust faced 9 key targets and 34 indicators.

The Nuffield Trust concluded that the politicisation of  the NHS is the main threat to improvements in quality: “even if investment is maintained at satisfactory levels, the greatest threat to the sustainability and progress of the Quality Agenda is likely to be the unrelenting and often damaging politicisation of the NHS.”