The NHS Confederation has warned that the health service could see its real term funding fall by £15 billion over the five years from 2011-12 and that Treasury proposals for efficiencies will not plug the gap.

In a paper launched to coincide with its annual conference in Liverpool, the Confederation says that “some of the experiences of centralising back office, procurement and decontamination have not always been happy ones” and “it is difficult to know if value for money is being provided.”

The paper also warns NHS managers against looking to some of the solutions that were widespread during the 1990s, such as allowing waiting lists to grow and making “slash and burn or salami slice savings” that focus on cost rather than value.

Instead, it argues that managers should focus on adopting best practice, smoothing pathways and eliminating waste, not least by improving quality to reduce errors and duplication.

“In the past, there has been a tendency to solve problems by using growth rather than making difficult decisions and there has been very little decommissioning,” it says. “The policies and approach that have been used to manage growth will need to adapt to a new and more challenging environment.”

The Confederation says that although Chancellor Alastair Darling announced in the Budget that public spending would grow by 0.7 per cent over the next comprehensive spending review period, most of this will be consumed by debt repayment and benefits.

The Institute for Fiscal Studies has estimated that this could mean a real terms reduction of 2.3 per cent for other government departments.

Responding to the paper on this morning’s Today programme, shadow health secretary Andrew Lansley said that a future Conservative government would protect the NHS even as other departments were hit.

However, the Confederation paper says that even if the health service secures zero or modest growth, increased demand from the recession and the ageing population, in combination with significant cost pressures from drugs, litigation and staff reforms, will leave it facing real terms cuts.

“With little or no cash increase, the NHS will need to plan for real terms funding to fall by 2.5-3% per annum. This is equivalent to a cut of between £8-£10 billion over the next CSR and up to £15 billion over five years,” it says.

“The savings needed to deal with this will also need to be realisable as cash and so the level of savings required may need to be very much higher. David Nicholson, the NHS chief executive, has suggested that this could be as much as £20 billion in the next CSR.”

Although Lansley appeared to commit a Conservative government to “real terms growth for the NHS”, he said that the Confederation’s paper “posed the right challenge” to the health service.

“That is not just to say there is going to be less money, therefore we must do things differently [but] to say we must deliver improving efficiency, improving quality, using the resources the NHS has available.”

Despite Lansley’s support, the Confederation warns that the worsening financial climate will inevitably lead to questions being raised about whether the country can afford the NHS.

It warns there will also be a renewal of calls for the introduction of charges or packages of rationing. But it rejects most common ideas because they would generate only small savings or be incompatible with the values of the NHS.

Link: Dealing with the downturn: the greatest ever leadership challenge for the NHS?