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NHS managers: “NHS cuts will lead to waiting times increasing”. Only one problem – there aren’t any cuts

    Whilst devouring my marmite on toast this morning, and listening to another expert reeled out to discuss the phone-hacking scandal, one of Sky News BREAKING NEWS banners caught my attention

    “OVER 50% OF NHS MANAGERS BELIEVE WAITING TIMES WILL INCREASE AS A RESULT OF NHS CUTS”, it said. I was gobsmacked. This would have to be the mother of all u-turns, I thought. To change your mind about granting the NHS increased funding – a flagship Conservative manifesto promise – would be political suicide for a Prime Minister and Health Secretary who have recently been beaten up over their NHS restructuring plan. Surely this couldn’t be true?

    I jest, of course. As I have mentioned previously on this blog, this is yet more evidence that the coalition government is failing to win the communications war. For the truth is that the government are actually INCREASING NHS spending, year-on-year, through the life-time of this Parliament – increasing in fact from £122.4 billion in 2010/11 to £124.1 billion by 2014/15 (in real terms). Yes, this might be a slower growth in funding than the 92% increase seen over the ten years after 1999, but it is a growing budget nonetheless, and which Minister wouldn’t be grateful for it in the current climate? Don’t these managers know that we are reigning in our belts and living in an age of austerity?

    As part of the accompanying interview to the story, Mike Farrar (head of the NHS confederation) said that the government should stop ‘attacking’ NHS managers and instead give them more ‘support if they are going to deal with the difficulties ahead’. But it is difficult not to raise questions about the effectiveness of said managers when the huge expansion of them appears not to have resulted in improved productivity within the institution. Between 1999 and 2009 the number of NHS managers increased by 81% (from 23,000 to 42,500), at a much faster rate than that of qualified doctors (+50%) and qualified nurses (+29%), with the rationale behind this expansion that it would lead to an improvement in efficiency.

    But efficiency can take two forms – allocative and productive. There is plenty of evidence that the extension of managers led to positive improvements in the former - with waiting times having fallen substantially over the period (no doubt helped by all-round increases in NHS staff). A more telling statistic, however, is the productivity of this large increase in human resources. For every additional input, what has been the effect on the level of output?

    Here, the NHS has been found wanting. The ONS’s own figures suggest that productivity (i.e. the output/input ratio) fell by 3% from 1995 to 2008. But even this figure appears to understate the extent to which productivity has really fallen within the institution. The methodology which the ONS uses to calculate these productivity statistics adds spending-weighted output measures of Hospital health services, Family health services and Prescriptions data. Input measures, meanwhile, comprise aggregates of labour, goods and services used in healthcare.

    There are two obvious problems with this method. Firstly, whilst official aggregate inputs might have increased by just 75% from 1995 to 2008, real health spending actually increased by 109% - meaning the real cost of inputs have increased much more markedly than the volumetric measure of those inputs. And secondly, it appears much of the output increase has been due to a massive expansion of prescriptions, such that by 2008 the government spent more on these than GP, nurse, dental and sight-test services combined.

    In Five Fiscal Fallacies, we therefore set about showing how productivity had changed in Hospital and Family Health services, by excluding prescriptions and using real spending as the input measure. This method suggested that productivity had in fact fallen by 34% in NHS services since 1995 – hardly a glowing endorsement of the effects of the extension of NHS managers.


    Ryan joined the Centre for Policy Studies in January 2011, having previously worked for a year at the economic consultancy firm Frontier Economics.

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