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Reform: More for Less in the NHS: Saving Money and Improving Quality
Thursday 22 July

  • Last modified date:
    8 February 2011

Reform: More for Less in the NHS: Saving Money and Improving Quality

I am delighted to be here today with such a distinguished audience and to share the bill with such eminent fellow speakers.  But I am also pleased to be here to talk about one of, if not the most, radical devolutions of power in the history of the NHS; away from the State and down to doctors and nurses on the front line, and down to patients in consultation rooms.

This government was elected on the principles of freedom, fairness and responsibility.  Last week’s White Paper set out how we will bring these principles to life in the National Health Service. 

The combination of the Conservative’s belief in the power of personal choice and empowering patients blended with the Liberal Democrat belief in local democracy will create an NHS that focuses on quality, on patients and on value for taxpayers money - and an NHS that delivers outcomes for patients that are among the best in the world.

The Economy

Before I turn to the detail of how we will liberate the NHS, I want to deal with the one issue that casts its shadow over everything: and that is the economy.

We have set ourselves the ambitious, but desperately needed goal of slashing the budget deficit so that by the end of this Parliament, debt is falling and not rising.
The Prime Minister and the Chancellor have set out clearly the scale of the financial challenge.  This year’s budget deficit is projected to be £155 billion – about as much as we spend on the NHS, defence and transport combined.  [£110bn+£37bn+£13bn=£156bn]

But think for a moment about our total debt.  If we include the money used to bail out the banks, the UK’s net public debt is currently £903 billion or almost two thirds of the UK’s entire economic output [62.2% of GDP].  That is why we’ve got to act.

If we delay, we only store up problems for the future.  If we delay, we only pay more – up to £70 billion in annual debt interest alone, more than the entire education budget in this country.  But most importantly, if we delay, it will not be us that are left with the debt, but our children and our grandchildren. 

We have lived beyond our means for too long, and the time has come to face up to our responsibilities.  The budget has already set the direction and later this year, the spending review will provide the detail. 
On average, government departments will need to make savings of around 25%.  Health, however, is protected. 

Some may question the rationale behind this.  But I passionately believe that protecting the NHS budget is the right thing to do.  To govern is to lead.  And in difficult times, leadership means making difficult decisions about the priorities of the nation.  We place health firmly at the top of that list of priorities.  Protecting patients is essential.  But protection for patients is not protection from reform.

We do not equate Health’s protected status with an attitude of inaction.  It’s not a case of seeing the difficult decisions of how to save money, how to do things more efficiently or not at all as being somehow ‘not our problem’. 
Nothing could be further from the truth as our White Paper demonstrates.

The NHS is a demand-led service.  If you are sick or need help, the NHS will provide.  Need – not the ability to pay – is one of the fundamental tenets of the Health Service.  But the cost of providing this service is high and rising.  The price of new drugs, new treatments and the latest technology, on top of an ageing population mean that spending on health and social care has increased faster than spending on other public services.

Since it’s birth, the National Health Service budget has risen by over 4% per year in real terms.  Such increases are, quite simply, no longer possible.  This means that the NHS – even within the context of a protected real terms budget – must find significant efficiencies simply to stand still.

Sir David Nicholson, the NHS Chief Executive, estimates that, without reform, we could need up to an additional £20 billion a year by 2013/14 simply to meet expected demand to the same standards as today.  There is a practical imperative for the NHS to become dramatically more productive and efficient.


As a consequence, the way we run the NHS is going to change profoundly in the coming years.  But one thing will remain the same: our commitment to the values of the National Health Service.  Healthcare available for all, free at the point of use and based on need, not the ability to pay - values that have guided the NHS since its birth. 
We will not go down the path of paying for healthcare or an insurance system, with all the transaction costs and inequalities of access that that would result in.

And for over sixty years, doctors and nurses, scientists and technicians, and civil servants, have breathed life into those values.  All have worked hard to deliver a Health Service we can be proud of. 

Their dedication and expertise is recognised and respected the world over.  And this hard work, coupled with the massive rise in investment, has brought significant improvements.  More doctors and nurses, more – and better equipped – GP practices and hospitals. 

But investment alone is not enough.  And the increases we have seen in the last few years have not, I’m afraid to say, been matched by a corresponding improvement in productivity or what is most important of all, health outcomes. 

While spending on healthcare has more-or-less now reached the European average, the standard of healthcare has not. 

Despite everything that the previous government did, survival rates for cervical, colo-rectal and breast cancer are among the worst in the OECD.  We are on the wrong side of the average for premature mortality from lung cancer, and heart and respiratory disease.  And you’re more than twice as likely to die from a heart attack in the UK than in France. 

Patients deserve better.  The NHS can be better.  And with the reforms we have set out, it will be better.

White Paper

The White Paper, Equity and Excellence: Liberating the NHS, will create an NHS with a single, clear-sighted mission – to lift health outcomes so they are among the best in the world.  It will achieve this through a radical shift in power away from Westminster and Whitehall down to patients and professionals. 


We need a resolute focus – of attention and resources – on results.  Not on measuring inputs or processes.  But a rigorous, consistent and long-term focus on improving clinical outcomes.

Far too often, the philosophy of emphasising process and output targets has distorted the clinical judgement of doctors.  We will focus on what is really important – clinical outcomes. 

Of course, processes are important to improve outcomes, but it must be the end result that we, on behalf of patients, measure and reward, not the means and mechanics of getting there.

We will get rid of all politically motivated process targets not backed by clinical evidence.  We will focus on the outcomes that matter - those that support clinical results, not distort them.  And, in place of endless, prescriptive top-down targets, we will support high quality care and services.  A range of Quality Standards, prepared through NICE, will act both as a best practice guide for clinicians and as a means of holding them to account. 

NICE has already published the first three – for stroke, dementia and venous thrombo-embolism – and it will produce around 150 more over the next 5-years.  And these quality standards will cover social care as well as health.

The care that is rewarded will be the best overall care for the patient, not simply the best care provided by a particular speciality.

The impact of these quality standards will be felt throughout the NHS.  While services will be local, the quality standards mean the Health Service will remain National. 

They will mean that patients can expect the same high standards of care wherever they are in the country.  They will be used by commissioners when they plan and commission services.  They will feed into contracts with providers.  They will enable providers to be rewarded when the quality of their care is excellent, penalised if it is poor. 

 Patient choice

But the change goes beyond a technocratic focus on clinically agreed ‘care pathways’.  For the White Paper also heralds a new era of patient power.

As all good professionals know, the outdated, paternalistic caricature of Dr. Finlay’s “doctor knows best” attitude is out of keeping with the modern provision of healthcare.  The patient must be central to all decisions taken about their care.  To put it another way, there must be “no decision about me, without me”.  This isn’t just cosy sentiment.  The evidence from around the world shows that involving patients in their treatment improves the effectiveness of that treatment, increases their understanding of their condition and boosts their satisfaction.

Patients will have more control over their own records.  With the support of their doctor, they will be able to choose their provider, their consultant-led team, their GP practice, their treatment where clinically appropriate, and a host of other things. 

And to help them make these decisions, and to help clinicians to respond to their decisions, they will have access to a huge amount of easy-to-understand data, published online.  Over the next few years, patients will experience an information revolution. 

And all the way, the voice of patients will help shape local services.  LINKs – Local Involvement Networks – will become HealthWatch, giving patients a far stronger voice. 

Funded by and accountable to local authorities, they will make sure the views of the public are heard when services are designed and commissioned.  They will help people, especially the vulnerable, to make the most of the choices available to them. 
HealthWatch will be a new local consumer champion, supported by HealthWatch England within the Care Quality Commission.
Both will, for the first time, give patients and members of the public real powers of scrutiny over local health services.

 Autonomy, accountability and democratic legitimacy

The title of the White Paper is, as I said earlier, Liberating the NHS because that is how we will achieve the real gains.  We will liberate clinicians from top-down targets and endless micro-management from, well, from people like me.

We will create an NHS run by empowered professionals free of the shackles of central government.  The NHS has received massive investment, but it is also drowning in bureaucracy.  We will cut the red tape and sweep it away, letting NHS professionals organise themselves locally. 

The responsibility of designing, commissioning and paying for local services will be given to groups of GP practices.  This will ensure that decisions are clinically led, involving all other healthcare professionals – hospital consultants, nurses, social care workers – to design services that put patients first and are focussed on improving clinical outcomes.

When GPs commission services, they will be able to do so, where appropriate, from ‘any willing provider’.  This will introduce a new level of competition.  It will stimulate innovation and increase productivity within what will become the largest social market in the world.

The way we pay those providers will change.  We are designing a new more transparent, comprehensive and sustainable system of payment.  One that incentivises efficiency, quality and integration.  Money will follow the patient, creating a huge incentive for providers to constantly improve the quality of care.

As a recent report – ‘Reform, Competition and Patient Outcomes in the National Health Service’ – concluded, “The effect of competition is to save lives.”

Within this new environment, the role of Monitor, as an economic regulator, will be vital.  It will act to ensure free and fair competition within the NHS social market – regulating prices and investigating both providers and commissioners who act in an anti-competitive way.

Local government will also have a greater role, with local democratic accountability introduced to health service decision-making for the first time in almost 40 years.  Local authorities will help to join up the commissioning of local NHS, social care and public health services. 

Culture of efficiency

The changes set out in the White Paper will have a profound impact on the way that healthcare is organised and delivered in England.  But as we improve health outcomes, we must also instil a new culture of value and productivity within the NHS.

These reforms are necessary in themselves.  We would be making them whatever the financial circumstances.  But the economic backdrop will provide added impetus to them.
We need to fashion a vibrant, creative NHS, full of ideas about how to improve quality and, at the same time, reduce costs. 

The incentives in the system that I have already mentioned – a massive increase in information and patient choice, a move to any willing provider and transparent payment systems – will, over time, have a significant impact on NHS productivity.

But in the nearer term, we can do a great deal to cut bureaucracy and increase efficiency.  Over the next 4 years, we will reduce NHS management costs by more than 45%.  Cuts on this scale don’t mean shaving off a bit here and a bit there.  It requires a whole new approach to NHS management.

PCTs, along with their £1.5 billion a year administrative costs, will go with the arrival of GP consortia.  SHAs will be abolished.  The Department of Health’s NHS functions will be radically scaled back. 

Regrettably, this will mean unavoidable job losses.  But we are doing all we can to minimise their number.  The 2-year public sector pay freeze for everyone earning over £21,000, while difficult for some, will help us save around 150,000 jobs.  Jobs that will concentrate on the front line rather than in management and administration.
Public Health and Social Care

This White Paper focuses specifically on the NHS.  But our ambition reaches far beyond it.  By the end of this year, we will publish a Public Health White Paper and next year a Social Care White Paper.  They will set out our plans to integrate the NHS and social care, and to create a Department of Public Health - changing the very shape and definition of healthcare in this country.


Last week we set the goal – this week we have started the work.  We have now launched three consultations: on commissioning, the outcomes framework and local democratic legitimacy. 
They will start the process of filling in the detail of our proposals and signal the way in which we will take reform forward.  Every step of the way we will involve the public, NHS and social care staff, local authorities and other interested groups to create an NHS that is genuinely responsive to people’s needs and properly grounded in the evidence of what works. 

And as leaders in your field, I urge each and every one of you to grasp this opportunity to contribute and help shape the NHS for a generation.


Let me be clear, re-organisation on this scale will not be easy.  It will not be painless.  But neither the NHS, nor the patient, nor the taxpayer can afford the costs of the current bureaucracy.  

In the coming months, the Secretary of State amd I, other Ministers and Clinical Leaders will travel the country seeking, first hand, people’s views about our plans. 

Like all other public services, the NHS must re-examine every aspect of everything it does.  The only difference is that by protecting the NHS budget and reinvesting any savings, we will ensure that it is not the sick who are asked pay the massive debts left by the last government. 
Our ambition remains undimmed despite the economic climate.  And we need to keep our eyes on the prize.  An NHS led from the front.  Patients in charge of their own care.  Every penny spent going to where it belongs, on front line patient care.  And most of all, healthcare as good as, or better than, anywhere in the world.


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