Labour to save pounds 100m for 100,000 patients

Labour offered a first taste yesterday of how it plans to cut bureaucracy in the National Health Service, claiming that pounds 100m, which it proposes to release from "red tape", will allow an extra 100,000 patients to be treated.

But its moves were attacked by managers as "a blunt tool" which risked financial control in the NHS. They said it remained deeply unclear how Labour's version of the NHS would work.

Labour would restore the right of all GPs to refer patients to the hospital of their choice, Harriet Harman, the party's health spokeswoman, said. This would end the system of prior approval and of the invoices involved in the system of extra-contractual referrals, which costs pounds 22m a year to run.

In addition, it will impose a further first-year across-the-board cut of pounds 80m on health authority and trust management costs, based on bringing all of them down to the average. On Labour's figures that amounts to roughly a 6 per cent cut on top of the 8 per cent real-terms cut which Stephen Dorrell, the Secretary of State for Health, has imposed for this year.

The pledges came at a press conference where Ms Harman stepped up Labour's claim to be "scrapping" the internal market and the thousands of contracts and hundreds of thousands of invoices it has generated.

But she failed to spell out how hospitals would be reimbursed for patients treated outside their boundaries, saying there were "a number of simple mechanisms" for doing that.

Karen Caines, director of the Institute for Health Services Management, said managers needed to know how hospitals would be paid for the treatment they provided, and how Labour would contain NHS expenditure.

It was clear what Labour was against, she said. "But we have absolutely no detail about how Labour's system will work. We don't know how the money is going to flow round it, how they are going to live within budgets, or what the transaction costs of what they propose will be. It really is time that they spelt all this out".

Mr Dorrell, who has already ordered changes to the extra-contractual referral system, which will cut its pounds 22m cost to pounds 10m, said it was "the oldest mirage in the book for an opposition party to say it can do all sorts of wonderful things by simply making the administration more efficient".

Ms Harman insisted, however, that "cutting bureaucracy will transform services. One hundred thousand patients could be treated by cutting pounds 100m from the pounds 1.5bn extra bureaucracy of the Tory internal market."

The computer systems used for invoicing would be used to book individually timed patients' appointments. This would cut the 5 million out-patient appointments missed each year, as they conflict with work or family commitments. The NHS, she said, must fit in with patients lives "rather than patients having to fit their lives around the NHS".

Alan Milburn, her frontbench colleague, said the NHS now had more than 50 types of manager, including sales managers, contract managers, business and development managers and marketing managers.

"Administrative costs now absorb almost pounds 12 of every pounds 100 of NHS spending, when before the internal market it was less than pounds 9," he said.

The United Leeds Teaching Hospital now sent out 12,500 invoices a year for treatment, including 2,900 for extra contractual referrals (ECRs), while one of the Newcastle Trusts sent out more than 15,000, a third for ECRs.

Labour's pounds 80m management cut would be achieved by setting a cap on each region, which assumes that spending in trusts and health authorities is at the national average, leaving the regions to make the savings across all of them.