On the "Budget Deficit" in the NHS

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On the "Budget Deficit" in the NHS

Recently, numerous reports have surfaced in the media that there is a "budget crisis" in the NHS. As a consequence, patients are having their treatments postponed or denied because these are "too expensive" and various Trusts are instituting job freezes and job cuts. Reports are circulating that up to 3,000 staff in the English NHS could lose their jobs because of these "deficits" which it is estimated could hit at least £1 billion for the 2005/06 financial year. The Royal College of Nursing (RCN) has highlighted the link between these "deficits" and the government’s "reforms of the NHS" and Dr Keith Palmer of the King’s Fund, a think tank which focuses on health, has stated that the present "deficits" would increase once the government reforms begin to bite in earnest.

Addressing directly the damage that would be done to the health service if these cuts were implemented, Beverly Malone, General Secretary of the RCN, declared: "We are putting a spotlight on this issue now before it is too late. Valuable, highly experienced frontline staff could be lost and we simply cannot afford to let this happen. It will hit patient services and put even more pressure on the nurses that are left. Nurses have delivered huge improvements in the NHS services and they have led the way in modernising the NHS. These job losses are a slap in the face for them and suggest their past, present and future contributions are of little value." The National Officer for Health from the Amicus union, which represent 80,000 staff in the health services including therapists, scientists and laboratory and maintenance staff, echoed these sentiments. Gail Cartmail stated: "Our members are already bearing the brunt of these deficits as many trusts are resorting to job cuts and multi-skilling to save money. We have not fought hard for greater spending in the NHS to see the extra money transformed into job losses and a poorer service for patients."  In response to the clear concerns expressed by those working in and familiar with the NHS, Patricia Hewitt, Secretary of State for Health declared that the government’s reforms were the solution to, not the cause of NHS "deficits". She continued, "Three quarters of NHS organisations are in balance or surplus, with most of the deficit concentrated in about 40 organisations, just 7% of the total number. But we have to get them under control, and the reforms will help us do just that."

But what are the facts about the NHS "deficits"? Why is it that, as Gail Cartmail points out, increased spending on the NHS is resulting in worsening services and job cuts? Where is the money going if not to improve services and pay those who work in the NHS in a way that recognises their hard work, expertise and the essential contribution they are making to the well being of the whole society? In a recently published report into financial management in the NHS, the National Audit Office and the Audit Commission declared that "the Department of Health achieved financial balance across the 600 bodies of the NHS in 2003" and continued that in fact there was "an aggregate underspend for all NHS bodies ... of £72 million". It further pointed out that although 24% of NHS Trusts and 14 % of Primary Care Trusts "failed to keep expenditure within their revenue resource", in most cases the "deficits were small both in absolute terms and in proportion to turnover."  The report also stated that in the financial years 2002/03 to 2007/08, expenditure on the NHS would rise 7.3% per year in real terms, taking the NHS budget from £63 billion in 2003/04 to £93 billion in 2007/08 and making healthcare "the fastest growing area of public expenditure". It also noted that the government’s "ambitious reform programme" would place "an unprecedented level of pressure on the NHS financial regime from 2004/05".

The government’s reform programme for the NHS, as for all the public services, is to open these up as a source of profit for the monopolies and in so doing to use the Treasury as a mechanism to pay the rich. The NHS, which has historically been a source of profits for the drugs monopolies, is now being opened up to monopolies from other sectors of the economy. The notorious PFI programme, which was introduced by the Conservatives in 1992 and has been expanded by the Labour government since 1997, has been one such scheme to pay the rich. Allegedly designed so that the state would be relieved of the "burden" of financing capital projects like the building of new hospitals, these are now widely recognised as a means of handing money from the state treasury directly to the monopolies. Professor Allyson Pollock, Head of Health Policy of University College, London, who has carried out extensive research on PFI contracts in the NHS, has pointed out that these proved so profitable for the monopolies, that the construction giant Jarvis sold off its construction arm in order to concentrate on PFI projects. It is also known that these PFI contracts are now bought and sold by city financiers and have become a further source of profit for financial speculators. Professor Pollock notes that since Trusts have to repay the interests and charges on the capital raised privately to build hospitals under PFI contracts, "the cost of private capital as a percentage of trusts’ annual revenue expenditure rises from an average of 8% to 27%". In this way funds are diverted away from patient care into the hands of the moneylenders.  She added, "Without a concomitant increase in revenue, local services will struggle." However, at the same time, NHS Trusts, as a result of the government’s "cost improvement programme", are under a requirement to find "savings" of around 3% per year. It is therefore hardly surprising that since 1997 some 13,000 NHS beds have been closed.

The government has made clear its intention to press ahead down its road of "investment with reform" in order to divert even more public money away from caring for patients and into the coffers of the big monopolies. The next wave of reforms includes, among others, establishing more foundation hospitals, merging strategic health authorities and PCTs and turning these into "commissioning bodies" which would open up clinical care as a source of profits for the monopolies already active in this sector. Reports indicate that companies like BUPA and the American companies Kaiser and United Healthcare are already lined up to enter this "market".

It is apparent that far from there being any "deficit crisis" in the NHS, the crisis is being caused by the government’s programme of paying the rich, regardless of the consequences to the public good. In this regard, Dr David Lister of Health Emergency noted, "Patricia Hewitt in May announced £3 billion was available for the NHS to buy in more services from high-cost private hospitals, despite the capacity of the NHS to deliver better value: the money is clearly available to rescue vital services and save our NHS. If she refuses to act, it will be clear she is happy for NHS organisations to fail."

The question is, what does it mean to speak about a "deficit"? It is quite irrational to set a budget on an arbitrary basis and then if the Trusts "overspend" declare that there is a "deficit crisis". What are the criteria for setting these limits? Who decides? Health care is not a production industry than one can determine the costs of production, the value of the product and whether it is being sold above or below this value. There is no serious discussion generated in society about the budget criteria, still less a scientific approach to investment in social programmes as an appropriation of the national social product. There is simply a declaration and a hysteria that something must be done to end NHS "overspending".

The state must provide the funds that are needed to respond to the healthcare needs of the people. The government has never made its wars of aggression and colonial conquest conditional on them staying within budget. On the contrary, they declare that whatever money is needed will be found. Therefore, the so-called budget deficit of the NHS is a direct result of the government’s refusal to face up to its responsibilities to society and provide the funding that is needed for healthcare. In any event, the money that is set aside in the budget for the NHS is immediately diverted into the hands of the monopolies and then the patients are told  "your treatment is too expensive", while the NHS  workers are criticised as "inefficient" and told that they must find "more savings". This is the way the government’s strategy of paying the rich wrecks the healthcare service. It cannot be hidden under a smog of disinformation about NHS "deficits".

This situation must be ended, monopoly right restricted, and the working class and people must intensify their demand: Stop Paying the Rich – Increase Investments in Social Programmes!