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The myth of the ‘wasteful and inefficient’ NHS

NHS “efficiency savings” have been the lodestar of politicians for the best part of three decades.

Kenneth Clarke introduced the “internal market” in 1990. Tony Blair launched a crusade for “foundation hospitals”. David Cameron and Andrew Lansley rammed through GP commissioning.

The objective of all these organisational shakeups was, to a large extent, to bear down on inefficiencies within the health service.

And now we have the demand from Theresa May in her speech yesterday that the pretty modest increase in resources for the NHS over the next five years must be accompanied by a new clampdown on waste.

It’s taken as a given in Westminster – particularly in the Treasury, who probably insisted that this section be included in May’s speech – that there are enormous inefficiencies in the health service.

And, in one sense, this view is almost certainly correct. Total UK public health spending is around £155bn a year. Any budget that size will have myriad expenditure lines where more is being spent than strictly necessary.

Around 1.7 million people work for the NHS, making it the world’s fifth largest single employer, behind the US and Chinese militaries, McDonalds and Walmart. That vast workforce all but guarantees that there will be inefficiencies in how many of these human resources are deployed. And all those inefficiencies will add up to a large-sounding number.

A review of NHS productivity by Lord Carter in 2016 duly identified £5bn of possible savings in acute hospitals in England. This included savings from better staff rostering practices and sourcing medical supplies more cheaply.

Yet note that this was in the context of the NHS being forced to make an estimated £22bn of efficiency savings due to ministers deliberately holding funding supply below rising demand. So there would still be a huge gap even if all Carter’s identified savings were achieved.

One newspaper yesterday wheeled out the familiar diatribe that the NHS is “a wasteful, inefficient and largely unreconstructed behemoth”. Yet the facts show that by international standards the NHS is not, actually, distinguished by its wastefulness.

Those convinced that the NHS is byword for inefficiency should consider the US health system, where total health sucks up more than 16 per cent of GDP (compared with 10 per cent in the UK) but where health outcomes in a host of areas are no better and in some cases worse than in peer economies.

What does distinguish the NHS internationally is its relative lack of resources. In 2015, the UK had just 2.8 doctors per 1,000 people, compared to 4.1 in Germany and 3.3 in France. The UK also had just 2.6 hospital beds per 1,000 people, compared to the OECD average of 4.8. The fact that we get broadly comparable health outcomes despite this shortfall, points to the NHS’s relative efficiency, not the opposite.

NHS managers should, of course, be required to continually identify savings, minimise waste and stamp out needless inefficiencies. Any manager, whether in the public or private sector, has the same responsibility.

But we should banish the myth that efficiency savings can be anything more than a relatively minor offset to the secular spending pressures of rising longevity and the development of expensive new health technologies.

So how to pay for the extra resources that the NHS needs? Higher taxes are the obvious answer, picked up by the older population who will, initially at least, benefit from the higher spending.

Yet there is concern among ministers about the ability of Theresa May’s fragile administration to get the necessary tax hikes through the Commons, especially in light of the fiasco last year when the chancellor tried to remove a tax loophole benefiting the self-employed.

So the suggestion in Westminster is that extra borrowing might take at least some of the strain. This wouldn’t be a disaster, but the silence from the usual suspects in response to this idea is palpable. The denunciations of unfunded spending by the right-wing media and Tory backbenchers have mysteriously gone missing. The righteous yearning for an absolute balancing of the government’s books at the earliest opportunity has seemingly evaporated.

The fact that the NHS spending has been (quite ludicrously) presented as a triumphant delivery of the Brexiteers’ red bus promise to spend £350m a week more on the health service no doubt has something to do with it. The cult of Brexit has eclipsed the cult of the budget surplus on the right.

There are parallels here with the US Republicans, who screamed blue murder about the sustainability of the public finances when there was a Democrat in the White House, but who cheerfully voted for large tax cuts last year, despite the fact that official projections show these are set to blow up the US budget deficit.

How easily the austerity fetish is forgotten. One could be forgiven for wondering how genuine it was in the first place.


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