Jeremy Laurance: Can things get any worse for the NHS?

Shedding jobs is the first stage. Closing hospitals comes next. No gain without pain

When talk turns to fat cats, few people think of their family doctor. Now a study of tax returns has forced a rethink. As the NHS's cash crisis deepens and hospitals shed thousands of jobs, it has emerged that some GPs are earning the equivalent of 10 nurses - up to £250,000 a year.

Whether such footballer-size incomes deliver value for money is at the heart of the current agonising over the NHS. Tony Blair robustly defended the 20 per cent-plus rises in doctors' pay over the past two years, saying: "It's right we make our GPs the best paid in Europe." He did not add that NHS trusts are closing wards and sacking staff to balance their books, in part because of miscalculations by Government over the cost of doctors' pay awards.

Can things get any worse for the NHS? They can. In yesterday's speech, the second in a week on the NHS, the Prime Minister told senior doctors and managers assembled by the New Health Network, a think-tank of health professionals, that we had reached "crunch point" on the NHS reforms. It was "not in the least surprising that it is causing difficulty", he said, adding: "But we will bear that because the system will be improved as a result."

Why has it taken nine years of a Labour government to reach "crunch point" when the structural problems besetting the NHS - duplication of services, too many hospitals in some areas and too few in others, excessive reliance on temporary staff - have been evident for years?

At last week's Downing Street NHS summit chief executives from 16 of the most embattled trusts paraded their troubles before the Prime Minister in an unusual display of penitence.

Yet most striking about their confessions was the age of the problems they had uncovered. A hospital (North Staffordshire) split on two sites with 19,000 patient transfers between them, is only now looking at how to reduce that total, cutting costs and making life easier for staff and patients. It is not rocket science, Anthony Sumara admitted, chief executive for just 11 weeks, but somehow it had escaped his predecessors.

Another trust (Royal Devon and Exeter) has cut its £800,000 bill for temporary nurses by 90 per cent in a year, since a new recruitment policy was introduced. Its head, Angela Pedder, did not explain why the hospital had been shelling out vast sums unnecessarily.

The lesson of the NHS crisis is that when you throw money at a problem, as Labour did in 1999, you get more of the same, not something different. The effect of the billions of extra investment that have gone into the NHS since 1999 has been to turn the handle faster, treating more patients and cutting waiting lists - but at vast and unsustainable expense.

Real reform - the sort that produces an improved, more efficient and sustainable service - only happens when people have their backs against the wall and there is no place left to go. That is what is starting to happen now. Shedding jobs and re-organising services is the first stage. Merging departments and closing hospitals comes next. No gain without pain.

Despite the gloom, there are three reasons to feel cheerful about the NHS. First, the crunch point, though delayed, has come early in the political cycle, three or even four years before the next election. That gives NHS trusts time - just - to go through the pain of reform before politicians call a halt and demand results to boost their electoral chances. Tony Blair made clear yesterday only one target counts - the 18-week limit on waiting times by 2008.

Second, predictions of the NHS train hitting the buffers in 2008 "when the money runs out", neglect the enormous increases of the past half-dozen years, which have seen a huge increase in capacity. Several thousand jobs may be about to go but they are a small proportion of the 250,000 extra staff the NHS has hired since 1997.

True, the record annual growth rates of 7 per cent-plus are set to halve and this will present a challenge. But in that time the service has grown from a £40bn weakling to a £92bn behemoth, at least matching the European average in public spending terms. There should be plenty of fat on such a beast from which to pluck juicy efficiency gains.

Third, ministers have shown themselves ready to take the flak that inevitably accompanies health service reform - so far. "NHS crisis" headlines are seen as part of the process. The big unknown is whether ministers' collective nerve will hold when things get tougher, as they must, and they have to deal with NHS hospital mergers and closures. That test is yet to come.

j.laurance@independent.co.uk