The English NHS faced a number of challenges over the five years of Coalition Government. Some were new and unique to the period, such as the major system reforms introduced with the Health and Social Care Act (HSCA) 2012 (The Stationery Office, 2012). Others were a continuation of underlying challenges such as the growing and ageing of the population, along with the rising burden of chronic disease. All were affected by a substantial shift in the financial pressure facing the NHS, however, as it had to adapt from a decade of real-terms budget increases of 7% each year on average, to five years of receiving budget increases of less than 1%. With demand for services rising, the NHS in England faced the daunting task of making efficiency savings of £20bn in five years.

The NHS was not alone in facing austerity – many other European health care systems faced similar challenges in the aftermath of the 2008 recession (OECD, 2015). The policies implemented in the English NHS mirror those used elsewhere. There was national action to reduce input costs through mandated reductions in administrative budgets, a national public sector pay policy which reduced real wage increases and measures to constrain drug prices. Alongside this, the NHS was asked to deliver improved technical efficiency through a reduction in the prices paid to hospitals under the national tariff system and attempts were made to improve system efficiency with policies to better integrate health and social care (NAO, 2011; Department of Health and Department for Communities and Local Government, 2014).

The Nicholson challenge

The global economic crisis in 2008 would have a substantial impact on public finances, and therefore the budget for the NHS. In 2009 Sir David Nicholson, the head of the English NHS, anticipated the forthcoming period of austerity, suggesting that the NHS would need to make around L15–20 billion of efficiency savings over the coming 5 years (Nicholson, 2009). This was then turned into a more specific objective of L20 billion of efficiency savings over the 4 years from 2011/12 to 2014/15 (Gregory et al, 2012), which came to be known as ‘The Nicholson Challenge’. The NHS established a programme, Quality, Innovation, Productivity and Prevention (QIPP), to deliver these efficiency savings (NAO 2011).