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NHS gets £1.2bn cash boost

Having vowed to keep within the previous Conservative government's spending plans for the health service, Gordon Brown, the chancellor of the exchequer, doubled the spending in the Budget by releasing an extra £1.2bn ($1.9bn) for 1998-9.

But as the extra comes from raiding the £5bn contingency reserve, the Treasury claims that there is no U turn in policy. The new funding, however, was unexpected and confirms the looming financial crisis that the health secretary, Frank Dobson, inherited (17 May, p 1433). A delighted Mr Dobson said that the increase gives the NHS ample time to plan ahead for this year and next.

The increase amounts to an extra 5%, or 2.25% above inflation. This is slightly less than was allocated for the current year and falls below the 3% annual average increase by the Conservatives. With a £500m debt overhang already, health resources will remain overstretched, especially in the coming winter. Mr Dobson said that the extra money would not remove the need for greater efficiency and financial discipline or avoid the hard choices that the NHS had to make.

The chancellor said that the new money was being granted on the firm agreement that administrative reforms in health would be fully implemented. More cash would be generated by action already initiated against prescription fraud, private capital for hospital building, merging trusts, and abolishing the NHS internal market. Hospitals would be expected to recoup from insurance companies the full fees of up £3244 per patient for treating people hurt in road traffic accidents.

The new funding for the NHS will provide £1bn in England, £107m in Scotland, £60m in Wales, and £31m for Northern Ireland.

View larger version (93K): [in this window] [in a new window]   Gordon Brown wants health service reforms in return for the money UPPA

Other budget measures included the abolition of tax relief on private health insurance for about 550000 people aged over 60, some of whom will end up on the NHS waiting list. The £140m saved will offset a reduction in value added tax on domestic fuel. A higher health tax on tobacco will mean that in future tobacco duties will rise on average by at least 5% a year in real terms rather than 3%. The tax on a packet of 20 cigarettes will go up by 19p from December.

The chairman of the BMA council, Dr Sandy Macara, said that the extra money was a pleasant surprise and added: "This is a recognition of our distress call. The worry is that we won't get it until next year. There is no way we can get through the crisis this winter unless we can draw in advance on the cheque."

Robert Maxwell, the King's Fund chief executive, said: "We are delighted that the Chancellor has decided to give extra money to the health service. But we must not be complacent. This will not take the pressure off the service, and the Government must still look at how the money is to be used most efficiently."

A building programme of 14 new hospitals costing £1.3bn funded by the private sector and leased to the NHS under the private finance initiative was also announced during last week's Budget speech. But negotiations for another 23 schemes under the private finance initiative were cancelled. The government said that this was necessary to "unlock the PFI gridlock."

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