There is a way to solve the health and social care crisis

Not every Conservative politician is obsessed with the EU referendum. Away from the increasingly shrill scaremongering from both sides, cooler heads quietly address the big challenges that will face the country once the question of its future, in or out of Europe, is resolved.

Ministers know that a financial crisis is coming in the NHS; the record £2.45bn deficit in England is just the start.

Another red warning light on their radar is the number of places disappearing in care homes for the elderly. Cash-strapped local authorities have cut the amount they pay for care. Some companies running private homes take in only those residents who can pay their (much higher) fees, saying it is cheaper to leave beds empty than accept the rates paid by councils.

These two huge challenges are linked: a report from spending watchdog, the National Audit Office (NAO) on Thursday found that delays in discharging over 65s who no longer need to be in hospital costs the NHS £820m a year. If they were released and had care in a residential or nursing home or in their own home, that could cost £180m a year, still leaving a £640m-a-year saving.

The NAO painted a bleak picture of a system that is neither joined up or sustainable. The number of “bed days” in acute hospitals lost to delayed discharges rose by 31 per cent in the past two years to 1.15 million.

“Without radical action to improve local practice and remove national barriers, this problem will get worse and add further strain to the financial sustainability of the NHS,” the NAO concluded.

Although hospitals have a financial incentive to release patients, many care organisations have “block contracts” without payments based on activity, and so they have no incentive to take on extra patients.

Local authorities – the reluctant frontline troops in Government’s austerity drive – spent 10 per cent less on adult social care than in 2009-10.

The issue is high on the agenda of a new generation of Tory MPs elected in 2010 as it draws up a “progressive centre ground” programme of 21^st century Conservatism. The 2020 Group wants to ensure the Tories are not just seen as accountants who can balance the nation’s books, and can show how an enterprise economy can boost social mobility as well as GDP.

George Freeman, the Minister for Life Science with responsibility for innovation in the NHS, is working on a series of measures to tackle the flaws highlighted by the NAO. He is pushing for greater incentives for local health and care leaders to integrate budgets, with the acceleration of the model being pioneered in Greater Manchester.

Manchester’s Combined Authority of 10 councils now have a budget of £6bn across health and social care alone, as well as funding for transport, housing and planning. A Mayor to be elected next year will also oversee the city’s police and fire services.

Freeman, co-founder of the 2020 Group, believes that devolving budgets holds the key to tackling the spiralling cost of managing chronic diseases.

He is proposing pilot schemes for central government to devolve health, care and even welfare budgets to NHS and local authority managers at city and county level, with incentives to reduce hospital admissions and avoidable costs.

Crucially, Freeman proposes that the Government should look at allowing local healthcare leaders to keep up to 50 per cent of any savings they make to reinvest in frontline services.

He is convinced that managers would deliver more for less, and improve the quality of life for patients while making our health and social care systems sustainable.

Freeman said: “If, in the public sector, you deliver more for less we typically reward you by giving you… less. If you deliver less and need more, governments typically give you more. Is it any wonder we see such low public sector productivity growth? For years, centralised Whitehall funding has tended to reward failure and demoralise the innovators.”

Freeman, who argues that Britain has the most centralised public services in Europe, believes that devolving them could be the “big idea” that defines modern Conservatism.

He told me: “In so many areas of local government, the effective running of local services like health and care, planning, road and rail links has been held back as they compete for money from different government schemes. This creates fragmentation, division, dependency and undermines local leadership. We all want to see ‘integrated’ services and ‘sustainable’ development, but our system of fragmented government makes it very difficult. That's why the Government’s devolution programme is so important – and exciting."

George Osborne’s Manchester project is the great hope for those who want to integrate health and social care. But the crises looming for both means that the Government must go further and faster now, rather than wait years to see if it works.

That will require investment in the short term to make savings in the long run, as well as trusting local managers more.

Many politicians talk a good game about devolving power but are reluctant to let go, not least because the buck stops with ministers if things go badly, such as at the Mid Staffordshire Hospital Trust.

David Cameron once said he wanted to be the first prime minister to leave office after giving up power rather than taking more. A fitting legacy would be to do that by creating the locally-run health and social care service we urgently need.