The Treasury has doubled the NHS’s annual efficiency target to 2.2%, as part of a series of major cost cuts.
It comes via a cross-Whitehall efficiency ‘crackdown’ which is intended to cut £5.5 billion of ‘wasteful spending’.
Chancellor Rishi Sunak claimed the move would free up £4.7bn to fund NHS priority areas over the next three years.
According to the Treasury, costs will be saved through digitising diagnostic and front-line services, which has been shown to reduce cost per admission by up to 13%.
Surgical hubs will also be expected to improve their efficiency by separating emergency and elective care, it said.
The Treasury also announced that quasi-non-government organisations (quangos) will be expected to find at least £800m in savings, after the launch of a newly commissioned Arm’s Length Body Review.
Matthew Taylor, chief executive of the NHS Confederation, described the changes to efficiency targets as ‘demanding’ and ‘highly ambitious’.
He said: ‘NHS leaders understand the need to have stretching savings targets given the extra investment going into the NHS and strain on public finances. They were delivering them before the pandemic and will do so again. But this is a very ambitious target and a number of factors will need to fall into place for it to be achieved.’
The NHS cannot run an efficient service while also operating ‘well over’ ideal occupancy levels, he suggested, adding that services are working with reduced capacity given the pandemic.
‘Combine this with the 110,000 staff vacancies we have in the NHS and it’s clear that asking for more demanding efficiency targets is highly ambitious,’ he said.
Saffron Cordery, deputy chief executive of NHS Providers, said trusts need more information to better understand how challenging the task is likely to be.
‘Even before this announcement, many were concerned about the scale of savings they would be expected to make in the coming financial year, especially given the need to tackle care backlogs, meet rising demand for services and deal with the ongoing impact of Covid-19 at a time of widespread workforce shortages,’ she said.
It comes after the Government announced National Insurance contributions will rise by 1.25% to help tackle the NHS backlog.
Earlier this year, the health secretary ruled out the prospect of a delay to that levy despite MPs’ calls to scrap it.