Professor Alan Maynard OBE surveys the impact of the recession on the NHS's chances of survival

The UK economy had two major strengths: its finance industry and North Sea oil. The latter is gradually running out; and the bankers should be run out of town for ruining the prosperity of our country.

Depending on whose forecast you read, the UK economy may shrink by three to five per cent this year. Some pessimists think that we may emulate the Japanese, and lose up to ten per cent of national income.

'If the NHS is to survive, it will have to improve productivity in ways unique to international healthcare experience'

The implications for public expenditure are profound. With an election inevitable in the next year or so, the Government has offered the public sector reasonably robust spending increases for 2009-10.

Even so with PbR tariffs rising by only 1.7 per cent, with an additional quality bonus of 0.5 per cent achievable if hospital comply with PCT CQUIN (commissioning for quality and innovation) initiatives, hospitals will be sorely taxed to stay solvent.

The productivity mantra
This in part accounts for the current Whitehall hysteria about productivity. After pouring loot into the NHS for seven years, the Government now recognises that no more additional funding is likely. Thus if the NHS is to survive, it will have to improve productivity in ways unique to international healthcare experience.

The autumn public expenditure statement offered funding increases of 1-1.5 per cent for the three years after 2010, and the election. In addition there was to be a system savings of £5 billion, with Whitehall muttering that the NHS should take a disproportionate share of this, having done so well in recent years.

The downturn turns down further
Since the autumn statement from Darling, the economic downturn has worsened and the Institute of Fiscal Studies has indicated that instead of £5 billion, there needs to be a saving of £20 billion. Thus post-2010, the NHS may face zero funding increases from the public purse.

This will hearten those organisations funded by industry, such as Reform (www.reform.co.uk), who favour the extension of insurance and co-payments.

The opponents of these “marketers” will be sorely challenged to sustain the NHS. What should they do?

Radical reforms and rational PCT rationing
They will have to be radical. The first reform could be to constrain technology inflation by making NICE guidance advisory. This is what happens in Scotland, where the advice of the Scottish Medicines Consortium is not mandatory - but informs the rationing of the Health Boards.

'if making NICE guidance advisory (as in Scotland) is impossible, NICE should be given a cash-limited budget to fund all its guidance, thereby capping its inflationary effect (and) be required to use half of its budget each year on appraisals that reduce NHS costs, identifying what cost ineffective technologies can be abandoned.'

If this change is impossible, NICE should be given a cash-limited budget to fund all its guidance, thereby capping its inflationary effect.

It should also be required to use half of its budget each year on appraisals that reduce NHS costs, by identifying what cost ineffective technologies can be abandoned.

'The bulk of rationing decisions are not made by NICE, but by PCTs. Currently, 152 organisations make inconsistent and often evidence-free rationing decisions.'

PCTs should be top-sliced to fund an agency to issue guidance on rationing. The bulk of rationing decisions are not made by NICE, but by PCTs. Currently, 152 organisations make inconsistent and often evidence-free rationing decisions. It is time they got their act together to exploit the available evidence base and introduce greater consistency into NHS rationing choices.

Pain over pay ahead
Labour relations in the NHS will become fraught. Managers will seek cheaper alternatives by adjusting skill mix and dismissing expensive workers whose performance is inadequate. The medical profession has increased its members’ real incomes very efficiently in recent years. Nurses and other workers have got less; but have still done quite well. A generation has grown up used to pay increasing and the world being their oyster.

All now face pay decreases. This may come about either by tax increases or by the public sector unions recognising - as their private sector colleagues appear to be doing - that wages have to be cut.

The effects of such a radical change in culture will fill the airwaves as public pensions are destroyed; lucrative hand-outs to redundant managers are stopped; and pay stagnation and cuts make us all poorer.

There will be trouble ahead
If national income does decline by five to ten per cent, we citizens must expect to share this pain. If NHS unions are robust in defending their salaries, there will be fewer jobs. That is the cruel trade-off faced by us all. If there are fewer jobs, and productivity does not alter radically, patient care will decline in quantity and quality.

Then the middle classes will revolt - and prosperity will return to the private insurance and private provider industries.

We are to garner the wages of sin. “Light touch” regulation has produced a crop of rogues who are busy hiding their pay and bonus details as their institutions are nationalised. Foreign investors, once attracted by oil and the financial sector, are moving their cash elsewhere - or have moved it.

Sadly, whilst recognising these realities at one level, both Government and the NHS are paddling on serenely and ignoring the storm force changes about to hit them. Prime Minister Cameron will presumably have to make some desperately difficult choices, whilst bringing the troops home to maintain domestic law and order as the voters adjust to hard times.