Clik here to view.
Small rise will not allow for the service to cope with an unprecedented conjunction of clinical and financial pressures
It is not easy to understand how ministers, including David Cameron, can laud the coalition's real-terms annual increases in the NHS's budget in England in each year of this parliament, while hospitals and primary care trusts across the country are shedding jobs and reducing services.
The London Ambulance Service announced on Tuesday it was cutting 890 jobs, of which 560 are frontline staff including paramedics, to help it save £53m by 2016.
A few figures help explain this apparent paradox. The average yearly rise in the NHS's budget throughout its 63-year history has been 4%. Between 2000-01 and 2010-11, while Labour was in power, that rose to 7%. But for the next few years that increase will be, at best, 0.1% above inflation, and some health experts say there will actually be a reduction, for a variety of reasons.
That 0.1% is the amount the coalition insists it is increasing the NHS's spending power by each year until 2015. The spending review last October, and last month's budget, allowed it to claim it was honouring its pre- and post-election pledges to increase the NHS's resources every year.
The trouble is that it's not enough – nowhere near enough – for the service to cope with an unprecedented conjunction of clinical and financial pressures. As Professor John Appleby, chief economist at the King's Fund health thinktank, says: "The spending review settlement equates to a real terms freeze for the NHS budget, although £1bn has been set aside for joint working with social care services, so it will cover inflation but not other cost pressures." Changing patterns of health needs are a key driver. The UK's population is both growing and rapidly ageing. Estimates suggest that demographic change will cost the NHS an extra £1bn every year alone, for example.
Then there is the growing expectation from a public that regularly hears about apparent medical breakthroughs which are claimed to save, extend or improve life, such as new drugs to treat cancer and other conditions. All these are costly to develop and for the NHS to buy.
The recognition of the uncomfortable twin pincers of rising demand and rising costs prompted Sir David Nicholson, the NHS chief executive, back in 2009 to charge the NHS with making £15bn-£20bn of "efficiency savings" by 2014, which health secretary Andrew Lansley recently pushed back to 2015. It was introduced because, as the King's Fund points out, "patient demands and the desire to maintain and improve the quality of NHS services will outstrip NHS funding growth in coming years".
For the NHS to do that, it has to deliver huge increases in productivity: 4% a year every year until 2015. There is little evidence to suggest this is possible. NHS productivity actually fell by 0.3% every year between 1995 and 2008, the Office for National Statistics has found.
Other chunks of the NHS are also having to be spent on the Cancer Drugs Fund (£200m), pay increments for staff (£1bn a year), extra VAT since January (£250m), and the transitional costs of the move to the new system of GP-led commissioning of healthcare (£500m).
Nicholson has been forced to remind NHS bosses they are meant to be meeting his £20bn challenge by delivering healthcare more smartly, not by doing less of it. But the growing evidence of cuts to things like hip and knee surgery, hernia operations and cataract removals show that he is not being heeded. Staff, which account for half of the NHS's costs, are being pruned, and services are now following.
Experts such as the King's Fund, the Nuffield Trust and the Audit Commission argue the NHS can and should be doing less of certain things, like referring patients to hospital for unnecessary diagnostic tests or even surgery. The argument about precisely what those things should be is just beginning.