DH is told 137,000 NHS posts must go in next five years

This would mean the NHS losing 10 per cent of its workforce. The estimate was given to the DH in a confidential report commissioned from the consultancy firm McKinsey and Company, and seen by HSJ.

Although the DH has said the report was “purely advice and does not constitute government policy”, it bears the department’s logo and has been disseminated among senior NHS managers.

Proposed cuts

30,800 non-clinical posts, saving £600m

£3bn - saving potential of increasing staff productivity in NHS hospitals

£1.9bn - savings projected by cutting external contracts and supply costs such as waste and food

£1.3bn - saved by cutting unneeded appointments and procedures

£8.3bn - estimated value of hospital estates which could be freed up and sold

The McKinsey report makes clear the cuts will need to be felt as much among clinical staff as administrators.

Based on its analysis of different staff group efficiencies, it says the cut required to full time equivalents for an NHS hospital with a clinical staff of 300 would be: two consultants, one registrar, 10 nurses, 10 healthcare assistants, three allied health professionals and eight non-clinical staff.

The report recommends a range of “potential actions in the next six months” that should be considered. These include: a recruitment freeze starting in the next two years; a reduction in medical school places starting in October, to avoid oversupply in five years; and an early retirement programme “to be implemented in the next two years” to encourage older GPs and community nurses to make way for “new blood/talent”.

The consultants also recommend that plans to increase staffing levels and investment, such as those set out in the national stroke strategy and the children’s service strategy, should be “reviewed”.

It says up to £600m could be saved by acute providers if those with above average ratios of non-clinical to clinical staff cut their administrators down to nearer the average level. Their £600m calculation was based on losing 30,800 non-clinical staff on an average salary of £20,000.

The analysis was presented to the DH in March this year and was shared with senior managers at strategic health authority level - several weeks before NHS chief executive David Nicholson said publicly the NHS should be planning to make up to £20bn in savings by 2013-14. Although some of the findings have been cited outside senior management circles the full analysis has been on restricted access.

The analysis sets out how up to £8.8bn of new recurrent annual spending could be cut from the NHS by 2013-14. It says the biggest chunk - up to £3bn - could be saved by increasing staff productivity in NHS hospitals. The second biggest saving is in non-acute staff productivity (up to £1.9bn) and in driving down costs of external supplies and contractors such as waste and food (up to a total of £1.9bn in savings).

McKinsey’s breakdown of the types of NHS organisation the savings are likely to come from reveals that acute providers will be hardest hit, with cuts equivalent to up to 38 per cent of their 2008-09 spending by 2013-14.

The smallest savings would fall on primary care, where spending would reduce by up to 13 per cent. Community care budgets could be cut by up to 28 per cent.

HSJ asked the DH whether the report - which earlier this year McKinsey won a competitive contract to write - concurred with the department’s own analysis and policy.

In response health minister Mike O’Brien played down its significance. He said: “Advisers advise but minsters will decide after taking a range of advice.”

He added: “The McKinsey work… is not in any sense an NHS plan of action. They are just making some suggestions which will be looked at with many other ideas.”

NHS Confederation policy director Nigel Edwards said some proposals looked at odds with current policy: “We’ve just spent a fortune on stopping GPs retiring. Isn’t the rest of the strategy to shift care out of hospitals and into primary care?”

He added that early retirement plans would take a long time to yield any savings, unless McKinsey was recommending the DH “reneges” on the NHS pension scheme.