(DH) NHS makes budget efficiencies

The Department of Health is contributing £2.3bn in additional savings, as part of £5bn efficiencies in spending across the public sector in 2010/11, announced by the Chancellor of the Exchequer today.

The Department's revenue budget for 2010-11 is adjusted from £104.6bn to £102.3bn, but spending will nevertheless rise by 18% in this Spending Review period 2007/08 - 2010/11.

The NHS, alongside other public services is making these savings in response to the current economic conditions, and to implement Lord Ara Darzi's vision of high quality, efficient services as set out in his review of the NHS - High Quality Care for All.

Health Secretary Alan Johnson said:

"Better quality, safe health care goes hand in hand with better value for money. Getting it right first time for patients means better care, but also better value for money as it avoids costly follow ups to put mistakes right. For example, our drive to reduce healthcare associated infections has improved the experience of thousands of patients and has saved the NHS £75 million in the last year.

"As well as providing health care and support to those that need it at this crucial time, the NHS is also well placed to help the country through the economic downturn as a major contributor to the overall economy and the country's largest employer."

Building upon the NHS's proven track record in delivering efficiency savings and its strong financial foundations, these savings will be delivered by a package of measures, which include:

* Delivering savings as part of the Treasury led Public Value Programme - a programme which looks to making efficiencies across the public service - which will enable the NHS to unlock savings of £500m by:

* building on the success of the first year of the World Class Commissioning programme - which is delivering more strategic and long term planning of local health services;

* extending and refining the Payment by Results tariff - where hospitals are paid for the work they do - to reward and drive both better quality and better efficiency; and

* rolling out new guidance and driving efficiency improvements in making better use of the existing NHS estate eg by introducing new benchmarking measures.

Increased efficiencies delivered by all these measures mean that the tariff prices paid for NHS work carried out will be built upon efficiency growth of 3.5 % in 2010/11, compared to 3% in 2009/10.

* Implementation of the Operational Efficiency Programme recommendations, ensuring that support services are cost effective, particularly on collaborative procurement, through the new Commercial Operating Model and on back office functions by building on savings already delivered through NHS organisations sharing back office functions, including payroll, finance and HR.

* Ensuring that all central Department of Health and Strategic Health Authority held budgets are robust and deliver rigorously on value for money.

Money allocated to Primary Care Trusts in December 2008 to commission local health services for 2009/10, 2010/11 will not be affected. The NHS will benefit from an uplift of 5.5% for front-line services in each of these two years, enabling the health service to continue to drive improvements and seek better value for money for the taxpayer. Also as set out in December 2008, the NHS will also be able to spend up to £800m of its accumulated £1.7bn surplus over these years for the benefit of patients.

In addition, the Department will release back to HM Treasury its centrally held contingency. This contingency was created at the time of the 2007 Comprehensive Spending Review to provide a buffer against potential cost pressures and financial turbulence. However, the excellent financial management in the NHS - with a surplus of over £ 1.7bn in 2008/09 - mean these centrally held contingencies can now be safely returned.