The 240 hospital, ambulance, community and mental health trusts in England are a major part of the NHS. They deal with three million patients a week, employ a million of the 1.4 million NHS England staff and account for £70 billion of its £100 billion annual budget. So it should concern us all that yesterday a record 65 per cent of those trusts announced they had ended the year in financial arrears and that the overall deficit is a record £2.5 billion. What’s gone wrong, should we be worried and what can we do about it? 

It would suit some to pretend this is all a result of poor NHS leadership. But as the Health Foundation think tank argued recently: “This is not a problem created by poor financial performance at an organisational level, [it is] a systemic issue affecting the vast majority of providers”. Trust chairmen and non-executive directors, many with successful business backgrounds, describe a toxic cocktail of three problems.

First, there are rapidly rising numbers of people needing treatment. In the past seven years the Norwich and Norfolk Hospital, which I visited this week, has seen the number of people being admitted as emergency cases rise by 34 per cent, outpatients up by 39 per cent and the number of ambulances arriving at A&E up by 69 per cent. These are eye-watering increases.

There is a clear gap between the quality of care we all want and the funding available

What does this mean for patients and staff in Norwich? It means an A&E service, one of the few rated as outstanding, struggling to see more than 120,000 patients a year in a department built only 14 years ago to handle only 60,000 patients a year. So, however hard the staff try, it can mean overcrowded waiting rooms, queues of trolleys in corridors and longer waiting times than anyone would want.

Second, we are in the middle of the longest and deepest financial squeeze in NHS history. Since its creation in 1948, NHS demand and cost has risen by 3.5 per cent to 4 per cent a year. On average, funding has kept pace. Now, however, even though the majority of the NHS budget has been protected, funding will rise, on average, by only 0.9 per cent a year between 2010 and 2020. This is a quarter of the historic average and well below what is needed to provide the same quality of service to a growing, older population.

Third, in the words of the Commons public accounts committee, we have tried to close this financial gap through a series of 4 per cent annual efficiency targets that “were unrealistic and have caused long-term damage to trusts’ finances”. Trusts helped deliver a record £19 billion of efficiency savings in the last parliament but, by the end of it, were understandably falling short. Asking for savings at double the rate of the economy as a whole, and three times the NHS average, was never going to work.

Does all this matter? If we care about the quality of care, it should. If finances fail, care quality is threatened. So what can be done?

But underlying all of this is a question for us as a nation. How much of our national wealth do we want to spend on health and care?

Every NHS trust chief executive is acutely aware of the need to maximise efficiency savings. Trusts in London are saving an estimated £80 million a year by buying supplies together. We have trusts in London, Essex, Manchester and Birmingham forming emerging hospital groups that share chief executives. And a recent review by Lord Carter suggests that up to £5 billion could be saved by sharing back office services such as human resources and finance, better rostering of nurses and cutting back on space not used for clinical services. Yet no one in the NHS believes that these savings will be enough to cover the large financial gap that is rapidly opening up.

We are therefore going to have to ask difficult questions about the pattern of health services. Does it make sense to keep open two A&E departments only 14 miles apart when they are so poorly staffed? Why don’t we close one and have the other fully staffed? Can every district general hospital continue to provide its own specialist urology and rheumatology services, particularly when there aren’t enough consultants to staff them? Can we rapidly find different ways to care for those who don’t need to be treated in hospital and could be cared for closer to home? And shouldn’t we be focusing on preventing people from getting ill in the first place, to avoid them turning up at their local A&E or GP?

But underlying all of this is a question for us as a nation. As our population ages and demand for health and care rapidly rises, how much of our national wealth (GDP) do we want to spend on health and care? We only spend a relatively small 8.5 per cent of GDP on health. The OECD average is 8.9 per cent, and the French, Germans and Dutch spend about 11 per cent, while even the cash-strapped Greeks spend more than 9 per cent. The NHS is remarkably efficient: no one gets near us in producing such good health outcomes for so little money. Yet to keep the same quality of care, we do now have to consider raising national insurance contributions or income tax, creating a dedicated new NHS tax or increasing charges, something nearly all of us in the NHS would strongly oppose.

In the end, you get what you pay for. There is now a clear gap between the quality of care we all want and the funding available. What we can’t keep doing is passing that gap to NHS trusts — asking them to deliver the impossible and chastising them when they fall short. Not least because it is placing an intolerable burden on staff whose commitment is the lifeblood of our NHS.

This opinion editorial and related news story are published in The Times