Magazine article New Statesman (1996)

Why Hospitals Are Struggling

Magazine article New Statesman (1996)

Why Hospitals Are Struggling

Article excerpt

To state the obvious, the NHS in England is in financial difficulty--more than a quarter of NHS trusts reported financial deficits in 2005. On the face of it this is surprising. After all, in recent times the health service budget has been growing by roughly 7.5 per cent in real terms annually--and over the lifetime of this government the increase is enormous, from [pounds sterling]34bn to [pounds sterling]92bn. So why has the Department of Health had to send turnaround teams of management consultants into such a generously funded system?

Much of the extra cash has gone on salaries. New nationwide contracts have left British GPs at the top of the international pay league, and consultants and nurses are in pretty much the same position: more pay has probably consumed at least half of the additional money for health this year. On top of the impact of an ageing population are a drugs bill rising by between 7 and 12 per cent a year, lower medical productivity caused by the European Working Time Directive, extra staff and larger clinical negligence claims. Nor is any of this helped by the way NHS finances are calculated. Hospitals have to pay a public capital dividend, a fixed return on capital employed. Although sensible, this dividend is treated like a debt and is deducted from the operating surplus, contributing to the now much-talked-about deficits.

Hospitals landed with a private finance initiative carry an additional burden--they are carrying what amounts to a huge mortgage that they cannot renegotiate. …

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