Billions of pounds of extra efficiency savings are to be required from public sector organisations, including the NHS, the Chancellor of the Exchequer announced yesterday.
The savings form part of the emergency measures set out in the pre-budget report designed to kick-start the British economy, which is predicted to be heading into a deep recession.
Government borrowing will rise to £78 billion this year and £118 billion next year. The Conservatives say the measures will increase public debt by £500 billion.
The public sector will also have to find a further £5 billion in efficiency savings in 2010/11. The NHS is being asked to make approximately 3% efficiency savings this year.
And there will be a sharp cut in the rate of growth in public spending, which is now expected to grow by 1.2% per year, a sharp decrease from the 1.8% previously planned.
No specific cuts to public sector spending programmes, such as the NHS IT programme, national ID cards or big defence programmes, were announced by the Chancellor. He also made no reference to targeting the large NHS surplus, which in 2007/08 amounted to £1.8 billion.
The NHS will benefit from the temporary 13-month cut in VAT from 17.5% to 15%, but will face increased wage bills from next year, when both employer and employee rates of National Insurance increase by 0.5%.
Top clinicians and NHS managers will also see their rate of personal taxation increase when a new 45% rate is introduced for people earning more than £150,000 in 2011.
Extra public sepending and temporary tax-cuts will have to be paid for in future years by a combination of extra taxes and much tighter public spending.
By 2011, the government is expecting the economy to be growing again, and the Chancellor claimed that by 2015/16 the budget will be brought back into balance.
The full text of the Treasury’s pre-budget report highlights the potential of IT to help deliver NHS efficeincy savings through IT-enabled initiatives like Shared Services.
The report references a shared services centre established through a 50:50 joint venture between the Department of Health and Steria that now serves more than 100 organisations in England.
In 2007/08, the DH in England’s departmental spending limit was £88.4 billion; in 2008/09 the figure is projected to be £99.9 billion; and it will reach £106.3 by 2009/10.