John Redwood: Collapsing productivity in the NHS has consumed every penny of increased spending

Sir John Redwood is a former MP for Wokingham and a former Secretary of State for Wales.

I thought this would make headlines. The ONS has said: “Total public sector productivity in the third quarter of 2024 is estimated to be 8.4 per cent below its pre-Covid peak in the fourth quarter of 2019. Healthcare is 18.5 per cent below”

It means that the £32bn a year extra in real terms put into the Department of Health budget this year compared to 2019/20 (Health Foundation figures) has all been lost in lower productivity. All those extra staff have not helped deliver more service to patients.

The DHSC is now spending over £200bn on NHS England and national policies, whilst the devolved administrations have their own additional budgets to provide healthcare in Scotland, Wales and Northern Ireland.

It was obvious the extensive and prolonged lockdowns would damage productivity. Hospitals and GPs often stopped doing non emergency work other than Covid cases. The staff that handled the covid crisis worked long and hard, bravely facing the unknown.

But other staff were at home unable to practice whilst the hospital was dealing with the pandemic, seeking to isolate patients and control infection. You would expect there to be a quick recovery of lost productivity once the emergency subsided and normal work could resume.

Instead, in the three months to September several years later productivity fell another 2.4 per cent on a year earlier, for no good reason.

The decision of the Chief Executive of NHS England to resign her job gives the Health Secretary a chance to make changes. The Conservative government had set up a more independent structure, with an NHS England Board with a chief executive to run the service and supervise the 215 hospital and ambulance trusts (which have their own chief executives and boards).

In later years, Conservative health secretaries regretted their lack of power to make changes as they saw the ballooning waiting lists and the plunging productivity.

But they decided they could not embark on another reorganisation. Jeremy Hunt, who held the office of Secretary of State for six years, led important work on improving patient safety and improved reporting of mistakes. Matt Hancock mainly supervised the pandemic response before concluding the command structure needed changing just before quitting the job.

The truth is the public hold the secretary of state responsible for the performance of the NHS. The Health Service itself often claims it needs more money to do a better job, and the elected politician is the person to argue their case in government and to then defend the settlement.

And there were large cash and real terms increases over the last parliament, not just related to the special costs of tackling Covid. Despite this, waiting lists surged.

There comes a point where the minister has to ask: where did all the money go? Did they hire the right kind of additional staff? What are the bottlenecks in getting more consultations, treatments and operations? Why did they not equip and staff more hospital beds with some of the extra money?

Most people looking at the figures would support real increases in spending each year. The population is going up, people are living longer, and the NHS can treat more conditions.

But most people would also say that an 18.5 per cent collapse in productivity is unacceptable. As technology improves, and as the NHS goes digital, there should be savings on administration, savings from on line consultations, and savings from better-targeted treatments. These should be providing a downward pressure on costs, even more patients and a wider range of treatments means more cost.

So what can Wes Streeting do? He sits at the top of a massive organisation with 1.34 million full time equivalent staff in NHS England alone. Between 2015 and 2023 there was an increase of 287,053 in staff numbers; this includes 33,243 more in central functions, 9.530 more managers, and 72,000 extra in infrastructure support and estates, according to the Nuffield Trust.

He needs to ask: what all those extra managers are managing? Why isn’t productivity and quality of service at the top of their list of priorities?

When I was responsible for industrial businesses I always encouraged quality systems. I learned that quality and productivity are two sides of the same coin. Get things right first time, and you eliminate time consuming and expensive mistakes with the need to remedy. Have a great working environment, and it will be safer and more motivational.

Too many patients from hospital have caught infections or developed a problem in hospital; keeping hospitals clean and well organised is crucial to success. Training employees to excel and rewarding those who do is also crucial to good outcomes. Medical teams need to be allowed to specialise and become experts at the type of treatments and operations they provide.

Maintaining Hunt’s transparency over errors is essential. Each time there is a mistake you need not just to apologise and correct for that patient, but sit down to design that error out for the future by changing protocols or procedures.

Clearing the waiting lists has been the target for ministers past and present . There is still a job to be done on the data; there are likely to be people on the list who no longer want the treatment.

There will be people who have gone private to speed up the process; there may be people who have now sadly died from something else whilst waiting; and there will be people who are double counted, as there is confusion over people seeking help for more than one condition and over managing lists when someone is transferred from one doctor or consultant to another. Contacting everyone on a waiting list to get an up-to-date picture of real demand must be a priority.

There will remain a substantial real task, and this can only be resolved by the individual GP surgeries and hospitals. The NHS has been in long term struggle with itself over how much is managed from the centre and how much from the local trusts. To make their task easier, there needs to be a reduction in the central overhead and the demands it makes.

Should there be a roll out of national computer systems for all, or should trusts buy their own? Should drugs and medical equipment be bought centrally or can hospitals and surgeries make their own decisions? Does doing more at the centre bring economies of scale, or more bureaucracy and extra overhead? Does too much centralisation mean less innovation and motivation in individual practices and hospitals?

The NHS does make use of the private sector which can provide competitive pressures downwards on some costs. Private contractors may be able to clean, cater, and maintain parts of the estate for less whilst ensuring good or better standards. Labour when last in office even used private health providers to deliver operations and treatments for NHS patients. The Health Service ought to be able to do some of these things for less as they do not make a profit, but sometimes private sector led expertise and specialisation produces a cheaper and better answer.

Streeting should make his first task to find out what all the senior managers are doing. He must tell them that each of them has a duty to drive forwards quality and productivity. With the new Transition CEO, he needs to decide a better balance between the centre and hospitals and surgeries; the centre should offer services and support where they have a purchasing or skills advantage, and cede control elsewhere. The number of senior management posts needs to be cut as people leave or retire.

No wonder the government is short of cash when £30bn has disappeared in the drop in NHS productivity. The Health Secretary now needs to turn his critical analysis of the NHS into an action plan to spend the money better.