George Osborne is resisting pressure from Conservative MPs to end the special immunity from spending cuts he has given to the £104.1bn-a-year budget of the National Health Service.
The announcement of £1bn of cuts in education on Monday has reignited a simmering debate inside the Conservative Party over whether the health budget should continue to be a "no-go area" at a time when other departments face reductions of up to 40 per cent.
One Tory backbench leader said yesterday: "MPs are getting a reaction in their constituencies about the cuts to the school-building programme. They are wondering why the NHS should be protected when the future of our children is apparently not."
As they try to protect their own budgets during a tough public spending round, some ministers are privately sympathetic to the backbench criticism. Although they do not expect the Government's decision to change, they may seek to get round the "no health cuts" policy by aiming to transfer parts of their own budgets to the NHS during the government-wide spending review to be concluded by October.
There is less controversy in Tory circles about the promise to boost overseas aid spending because the £6.2bn budget is much smaller than that for health.
During the general election campaign, the Liberal Democrats said no department should be exempt from cuts but the Tories promised to raise spending on health and international development in real terms each year. David Cameron's flagship health pledge, designed to reassure the public about "Tory cuts", was confirmed in the coalition agreement between the two parties and in last month's Budget.
Mr Osborne has told Tory critics of his policy on the NHS that they are "flogging a dead horse." In private meetings with Tory MPs, he has argued that the health service will still face a tight squeeze because the generous budget rises of recent years under Labour will be replaced by only a tiny increase at a time when it faced real pressures because people are living longer and the availability of new drugs. He reassured them that the NHS would not be a no-go area for reform or efficiency savings. The Chancellor backed Mr Cameron's pre-election promise, saying the Tories should not put at risk the public trust on health they had now won.
Unions claim the health service is already feeling the squeeze, with jobs being cut despite the promise to safeguard frontline services. Last night the Royal College of Nursing (RCN) said almost 10,000 posts had been lost through recruitment freezes, redundancies and not replacing people when they retire.
In April, the RCN warned at least 5,600 posts had been lost or were earmarked for cuts, based on data from 26 trusts in England. It says new figures from 100 organisations in England show 9,973 posts have gone, been frozen, or will go – the equivalent of 47 jobs a day over the past six months.
Think-tanks claim that £12bn could be squeezed out of the health budget without harming patient care. They say that ring-fencing NHS spending has put greater pressure on other departments. Education and defence have been asked by the Treasury to prepare plans for cuts of between 10 and 20 per cent, and other departments up to 40 per cent.
A ComRes survey for the Local Government Association found that 56 per cent of people want to protect doctors, nurses and other hospital staff from cuts, the highest rating of any group and ahead of the police (35 per cent) and schools (29 per cent). However, when asked which jobs should be cut, 69 per cent said NHS managers, ahead of those in quangos (57 per cent), overseas aid (49 per cent) and benefit payments (34 per cent).
Labour has stoked the internal Tory row over health spending by saying Mr Osborne was "irresponsible "to exempt it from cuts. Andy Burnham, the shadow Health Secretary, said last week: "The effect is that he is damaging, in a serious way, the ability of other public services to cope: he will visit real damage on other services that are intimately linked to the NHS."
Public finances: Possible savings – and the impact they would have
One in 18 adults in employment works for the NHS. The workforce has grown almost 30 per cent in the last decade and the paybill accounts for half the total NHS budget. But cutting jobs has an impact not only on the NHS – reducing operations, lengthening waiting lists – but also on the economy. The NHS loses their labour, and the country their purchasing power.
Cut pay and pensions
NHS staff won big pay rises between 2004 and 2006 as Labour was anxious to win support for its reform agenda. Since 2007, as the economic situation has worsened, a secure job in the NHS with salary and generous pension has looked increasingly attractive.
No one loves the men in suits. They are blamed for sucking scarce resources from those at the front line. The Government has pledged to cut NHS management costs to a half by 2013-14. But it will be hard to make cuts of this order without having an impact on patient care.
Tougher cost effectiveness threshold
If the NHS total budget is cut by 25 per cent then it stands to reason that the threshold for cost effectiveness for new treatments operated by the National Institute for Health and Clinical Excellence should be reduced by a similar margin. Instead of paying £20,000 to £30,000 for a drug that delivers a standard benefit in future the NHS would pay only £15,000 to £23,000 for the same benefit.
Suspend training and R&D
Together these add several billion to the NHS budget. Training is essential to ensure staff are up to date with advances in treatment and research and development are critical to securing a health service fit for the 21st-century. But a temporary moratorium during the economic crisis might be sustainable without inflicting irreparable damage on the NHS.