Labour's shadow health secretary John Healey MP lost little time getting stuck into Liberatin' Andrew Lansley over the health spending figures used in yesterday's CSR: the text of Healey's letter to The Liberator is copied below.

The indefatigable Sally Gainsbury of Health Service Journal blogs that she thinks she has found almost all the missing money, however. (Maybe there's a reward?) And now the iridescent John Appleby says that he has found the rest, in capital.

Rt Hon Andrew Lansley CBE MP
Secretary of State
Department of Health
Richmond House
79 Whitehall
London SW1A 2NS

20 October 2010

Dear Andrew,

As often with Government Spending Review statements, the devil is in the detail. And I am concerned that what the Chancellor announced today does not match what the Prime Minister, the Coalition Agreement and you as Health Secretary have promised for the NHS.

David Cameron said on 4 January this year: "We are the only party committed to protecting NHS spending. I'll cut the deficit, not the NHS. And don't for one minute buy the Labour claim that they'll do the same …Unlike us, they have not committed to protecting areas of the health budget such as public health and capital investment" .

In the coalition agreement, the Government pledged to “guarantee that health spending increases in real terms in each year of the Parliament, while recognising the impact this decision will have on other departments”.

And of course you have made such public promises to NHS patients and staff yourself, including in your press release today: “The Spending Review reinforces our historic commitment to protect health spending and means that funding for the NHS will increase in real terms in every year of this Parliament.”

However, there are a number of serious questions over the funding figures that the Government has announced and published today, which suggest there is no real terms increase in NHS spending over the Spending Review and no protection for the NHS budget.

In other words, you are breaking your NHS promises.

People deserve a full explanation on the following points, and I challenge you to provide it. I am tabling each of my questions below as named day questions, so that your answers will be set out on the Parliamentary record.

No real increase in NHS funding
The Government’s June Budget set the total of NHS resource spending this year 2010-11 at £101.5billion, and capital at £4.9b [table 2.2, p43 Budget Red Book 2010]. Today’s spending review confirms NHS resource spending will be £109.8b in 1014-15 (sic), and capital £4.6b [table 2.2, p43 SR Green Book]. This is below the level needed to keep pace with inflation using the Treasury’s GDP deflator. It is therefore a below-inflation increase and a real-terms funding cut for the NHS.

The figures published at the Budget in June and today in the Spending Review also show a cash standstill for the NHS as resource funding for next year is set at £101.5b – this is a 2 per cent real cut to NHS funding next year.

The Chancellor appears to have fixed the starting point for the resource funding allocations at £2.8b lower than he confirmed the NHS is spending this year – £98.7b instead of £101.5b [table 2.2, p43 SR Green Book; table 2.2, p43 Budget Red Book]. This is a textbook Treasury trick. The effect of changing the baseline is clear; the reason for this is not. What precisely is the financial rationale for this change, and does excluding depreciation, as the footnote to the table states, account for all £2.8b of the discrepancy?

The Chancellor gave no figures for the annual increase in the NHS budget but the figures set out in the green book and your press release imply annual real increases (using Treasury website deflator and OBR) of: 0.1%, 0.1%, 0.2% and 0%, in successive years. In other words, the barest minimal real increase in the first three years and no real increase in the fourth year of this spending review and Parliament. Can you confirm these figures for annual real increases in total spending limits?

These figures will drop further if the Chancellor has not incorporated into the NHS budget baseline the £1b surplus the NHS is required to run this year [para 26, p11 Revision to the Operating Framework for the NHS in England 2010-11]. This money is part of the NHS funding for this year and should be part of any baseline for the spending review. Your acting permanent secretary Richard Douglas told the Health Select Committee last week that: “The measure on which we would always look at growth will be on the provision made in this year rather than the final outturn. So the measurement we have always done in spending reviews is what is the provision this year, and the growth will be measured against that”. [Uncorrected transcript of oral evidence to the Health Select Committee, 12 October 2010].

Can you confirm that this year’s planned NHS surplus is incorporated in full into the NHS DEL baseline for the spending review?

On NHS capital the cuts are even clearer, and the Prime Minister’s broken promise to protect spending even starker. Can you confirm that the figures published that show a 10% cash cut in the NHS capital budget over the next four years from £5.1b this year to £4.6b in 2014-15 are correct? [SR Green Book, table 2.2, p43]

No protection for the NHS budget
Despite promises to protect the NHS budget, the Chancellor has taken £1b a year out of NHS health care to help paper over the cracks in adult social care funding [£0.8b, £0.9b, £1.1b and £1.0b in successive years of the spending review – table 2.3, p44 of SR Green Book]. The social care transfer is double counting. It means that this money is spent on social care and not available to the NHS to spend on health care. So, even on your own baseline and allocation figures, the NHS will not get the real increase in funding each year promised by the Government.

Can you confirm, that if this allocation for social care services is properly excluded from NHS healthcare spending, what the annual real change in NHS healthcare spending will be over the spending review period?

Furthermore, the increase in the PSS grant – part of total health spending – is significantly and proportionately greater than the increase in the total health DEL, taking more funds out of NHS spending as this money is passed directly from the NHS to local councils.

New NHS costs from Government policies
The NHS of course also faces other avoidable extra costs from decisions the Government has taken, including the estimated £2-3 billion bill for your white paper’s top-down reorganisation and an estimated £250 million cost of the Government’s VAT increase. What is the estimate the Department has made of the extra cost of the VAT rise? What is the estimate the Department has made of the cost of the White Paper reorganisation?

The NHS will have to find these extra costs within a funding settlement which it is increasingly clear falls far short of what many in the NHS believed your Government had promised.

I look forward to your full response on these points.

Yours sincerely.

As ever

John Healey MP
Shadow Secretary of State for Health