PharmacoEconomics & Outcomes News 566 - 15 Nov 2008

Will the credit crunch make theNHS shed the pounds?

As it becomes more and more clear that the effects ofthe current credit crisis will be felt in the real world, JohnAppleby, chief economist at the King’s Fund, London,UK, has attempted to predict how the UK NHS will beaffected in a BMJ editorial.

He says that, although predicting the future in such anunstable environment is difficult, the short-term, directeffect of the crisis will probably be minimal. Privatesector healthcare providers will have a reduced ability toborrow to fund developments, and charitableorganisations may also be affected. Furthermore, thefact that around 100 councils have £843 million worth ofdeposits in collapsed Icelandic banks may affect localauthorities’ commissioning of services from thevoluntary sector.

Luckily, the majority of NHS organisations are notallowed to deposit cash or earn interest in commercialbanks, with the government’s own bank being usedinstead. However, foundation trusts can choose toinvest in the private sector. Overall, the NHS should beat low risk when it comes to direct exposure to bankingfailure, according to Appleby.

Over the next few years, increased inflation andpotential surplus claw backs by Treasury may eat intothe NHS’s disposable income. NHS staff may beprompted to demand higher pay due to increasing retailprices, although the government will strongly resist thiswith predictions of a rather dramatic reduction ininflation next year.

Belts may be pulled even tighterIn the longer term, the crystal ball is much murkier

when it comes to speculating about the aftermath of thecredit crisis and its effect on the NHS. However,Appleby states that, although "NHS spending isguaranteed up to April 2011, what happens after thenlooks decidedly less rosy".

There will be a reduction in government income fromtax receipts. In addition, increasing unemploymentmeans increasing needs for government spending onbenefits, and therefore potentially less money for health.

Best case scenario is no real growth in funding to2014, a huge contrast to past trends, with a lot ofpressure for cost cutting an productivity improvements,according to Appleby.

Moreover, as well as pressures on NHS funding, thecredit crunch and recession will affect the population’shealth and increase demand for healthcare services.

Even if the current efforts of governments succeed ingetting the financial system up and running again, it willcome at a cost. So far, £387 billion of the totalworldwide package of over £1.6 trillion is coming fromthe UK. If this amount increases, the credit worthinessof governments may even come into question. The exactimpact of this huge opportunity cost on the NHS is hardto predict. Nevertheless, Appleby says that "for nowpreparation for a difficult financial and health futurelooks unavoidable".Appleby J. The credit crisis and health care. BMJ 337: 1022-1024, No. 7677, 1Nov 2008 801020688

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PharmacoEconomics & Outcomes News 15 Nov 2008 No. 5661173-5503/10/0566-0001/$14.95 Adis © 2010 Springer International Publishing AG. All rights reserved