the productivity challenge - john appleby

©The King’s Fund 2010

The productivity challenge

John ApplebyJuly 2010


A history of debt…


A history of debt…unchecked could take the UK back to debt levels of the Great Depression...


The coalition Emergency Budget outlines tax rises and spending cuts…


…which imply between 25% and 40% real cuts in all unprotected spending departments…


…but the NHS is protected from these cuts

The Spending Review this autumn will reveal how much the NHS gets – but it is unlikely to be anything like the 6% to 7% real increases it has received over the last nine years…

We will guarantee that health spending increases in real terms

in each year of the parliament, while recognising the impact this

decision will have on other departments.


Although protected from real cuts, the NHS will face increasing demand and cost pressures over the next few years.

If we want to meet these and improve the quality of services the NHS will have to improve its productivity – and hopefully its efficiency.

With no real rise and no productivity improvement, meeting Wanless’ aspirations for the NHS in 2013/14 requires productivity improvements to the value of around £21 billion – around 20% of the current English NHS budget.


Clinical governance

£21 billion

Shortfall if no real rise for next 3 years and no productivity improvement

£126billion

NHS funding needed in 2013/14 to meet Wanless NHS ‘vision’

£12 Bn

£1.6 Bn £1.8 Bn

£3.5 Bn

£1.4 Bn

£0.4 Bn

Improve quality

Demand driversCapital

Real pay and prices

But why improve productivity… to do what, precisely?


Year-on-year productivity gains of around 6% is a hugely daunting task for the NHS. Especially as it has achieved virtually no gains in productivity over the last decade.

But, looking at the Wanless breakdown of the funding gap suggests this may not be quite as difficult as it appears….


Cost and demand drivers

Explanation Value (£bn)2011/12-2013/14

Real pay and prices Growth in pay and prices over and above general inflation 3.5

Capital Replacement of NHS estates, equipment and improved facilities, including ICT

1.6

Waiting times Costs of ongoing reduction in maximum inpatient and outpatient waiting times

1.4

Existing NSFs Best practice in five national service frameworks (NSFs), disease areas and extension to other areas

2.4

New NSFs Costs of new NSFs, improvements to existing NSFs and medical technology

9.6

Clinical governance Reducing hospital-acquired infections, adverse incidents and avoidable admissions

0.4

Demand drivers Including health-seeking behaviour, demographic changes and ill health in old age

1.8

Total increase Cost and demand drivers 20.7


£21 billion

..around 6% productivity gain each year for three years..

£14 billion

..around 4.5% productivity gain each year for three years

£11 billion

..around 3.5% productivity gain each year for three years

Funding gap with no real increase in spending and no productivity gains...

Productivity gap with pay and capital spend freeze and no further investment in reducing waiting times...

Productivity gap with pay and capital spend freeze, no further investment in reducing waiting times… and 1% real spending increase each year to 2013/14.


Although with some tough decisions on pay, capital and waiting times, together with a modest real increase in funding, the productivity challenge will be less daunting, it is still significant.

The question now is what, in practical terms, the NHS needs to do.


Visit: www.kingsfund.org.uk/quality

the productivity challenge - john appleby

Health & Medicine

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