Simon Parker is Director of New Local Government Network

George Osborne’s austerity programme has left only three departments unscathed, and by far the largest of these is health. While council and many other services are being cut back , hospitals and GPs continue to see their budgets rise with inflation.

The political logic behind this move in unimpeachable. But is it also good policy? At the moment, NHS Trusts and local government are going bust together. Ministers could take a step towards saving them both by breaking the ringfence.

The difficult truth is that NHS finance is on what looks like an unsustainable trajectory. Rising demand from the UK’s growing elderly population is pushing up costs to the point where the service faces a funding gap of £44-54 billion by 2020. There are options for narrowing the gap, but they require a huge amount of reform to pay and productivity.

Ultimately, the best bet for securing the future of our hospitals is to stop people from needing them in the first place. That means spending money elsewhere. Instead of propping up acute services, we need to spend far more money on social care and public health to keep people fit and healthy.

Both the NHS and the Government have implicitly conceded this point. The health service has been redirecting some of its spending towards community health initiatives, and Ministers have already broken the ringfence to create a new £1bn fund to integrate health and social care. The money is at present double-counted, so that it sits within both the NHS and local government budgets at once. This sleight of hand should fool no one.

Ministers are already prioritising health and social care integration – essentially bringing together council and health services to keep older people out of hospital and to stop recovering patients taking up expensive beds when they would be more comfortable almost anywhere else.

The problem is that councils are expected to put most of the effort and investment into these schemes, but they receive – at most – a third of the savings. Receiving their rightful share of these savings would encourage councils to do more to promote healthy lifestyles and would also help take the edge off the very deep local government cuts (though it still would not do enough to address the sector’s estimated £16.5bn spending gap).

The Government has created a system in which the NHS pays councils for prevention: essentially, local government gets paid for stopping older people needing hospital care. This principle should be extended a lot further. The health service should, for instance, pay prevention fees for the role councils play in reducing long-term conditions such as dementia and diabetes. Over time, these payments could be extended to local social enterprises too, creating an innovative market for wellbeing, to reduce the costs of our national sickness service.

Far from destroying the NHS, breaking the ringfence could help to save local public services.