To demand "savings" from the country's district health boards is good economics but brave politics.

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Alarm over $138 million DHB saving plan

Good economics because it makes hospital administrators look for ways to reduce waste and try to ensure they are making the best possible use of the money they are allocated.


Brave politics because ministers of health find this almost impossible to explain. When they use the word "savings", or "efficiencies", we hear "cuts" and rightly fear the idea of money being taken out of the health services.

When ministers point out that, far from being cut, the health budget increases inexorably year after year, it is fair to ask what, then, is the point of demanding that some of the money be returned?

The point, economists will say, is to put public hospitals under the sort of financial discipline that works in the private sector. The so-called "required savings" should really be called a return on operating capital. In theory, managers of a public service should not need that obligation in order to ensure their operations are not wasting money.

But in real life, human nature does need this sort of demand. We tend not to worry about waste and inefficiencies unless we have to find savings.

The temptation not to care about excessive cost is part-icularly strong in social services such as health where everything they do is much more important than money.

The nominal returns required from district health boards this year look very light. The Waikato and Auckland boards have to find 4.4 per cent and 2.4 per cent of their operating budgets respectively.

The Waitemata and Bay of Plenty boards have to save just 0.3 per cent, Northland 0.1 per cent. Altogether the boards have to save $139 million from a total allocation of $11.4 billion in the year to June.

What matters is not the fact that they have to make savings but where in their operations they make them. Information obtained from the boards by the Labour Party suggests they may be scrimping on staffing costs.


The Waikato board, which has to save $43.4 million from a budget of just under $1 billion, is leaving some vacancies unfilled.

This will save less than $7 million of its required amount but it is the item that raises the alarm of the Association of Salaried Medical Specialists, the Nurses Organisation and the Public Service Association (PSA), besides the Labour Party.

The specialists' association says staff are coming to work sick. The PSA says some are not taking leave or are working double shifts to cover roster gaps. The nurses' union says some of its members dread coming to work and go home in tears from the pressure.

Labour's health spokeswoman, Annette King, says boards are taking the easiest option by not filling vacancies. She is probably right.

It is easier to make do with fewer people than to negotiate more efficient rosters to make maximum use of equipment or maintain a culture in which all professional staff are accountable for the resources they use.

But these are the sort of disciplines that perhaps can extract better value for the taxpayers' outlay. It has to come from the top where the demand will never be popular.

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