Has the #SpendingReview fully funded the NHS?

Conservatives NHS Funding

There are two competing but related health service ‘narratives’ being promoted in the immediate aftermath of the spending review.

The first is that George Osborne has listened and delivered the “biggest ever commitment to the NHS since its creation”. The second is that Simon Stevens, head of NHS England, has played a blinder running rings around the Treasury and securing the money to underpin his Five Year Plan.

NHS Spending

I’m disinclined to jump on either bandwagon. And here’s why.

First, however, we should welcome the fact that the Chancellor has listened to health unions, campaigners and the medical profession by front loading a significant slice of the promised extra £8bn in order to address the immediate financial crisis brought on by the unprecedented financial squeeze imposed by his government over the last 5 years.

However, the NHS is a long way from being out of the woods.

Let’s not forget that the sums agreed in the NHS Five Year Plan were about plugging the gap caused by flat lining funding at a time of a growing and ageing population. As health commentator Roy Lilley put it, when pointing out some of the more ludicrous over-claiming coming out of the Department of Health’s press office, the funding will just about:

allow the NHS to keep the lights on, pay the bills and if we are lucky, invest in turning the vanguards (new models of care pilots) into operational, replicable, scaleable reality.

But even this will only happen if the NHS is able to find £22bn efficiency savings by 2020 that nearly all informed opinion believes is highly unlikely. Around three quarters of savings found in the last 5 years in the NHS have come through cuts to tariffs (the price paid to hospitals for treatments) and capping NHS workers’ pay. But neither are sustainable going forward, with hospitals in open revolt over tariff reductions and NHS staff increasingly voting with their feet.

Those praising Simon Stevens deft manouvering must consider the fact that he now has to keep his side of the bargain. And if those savings fail to materialise, any further funding problems in the NHS will be very happily laid at his door by a Chancellor who will point to the money and wash his hands of any responsibility.

With NHS providers likely to be hitting £2.2bn in deficits by the end of this financial year and facing a £1bn bill for increased NI contributions from April that front-loaded £6bn is already looking under serious pressure. Throw in at least another £1.5bn taken from the NHS to fund social care projects with local authorities through the Better Care Fund, a huge dip in spending from 2018 and a commitment to move to 7 day services, you can see how we might not have seen the back of the NHS funding squeeze – even if short-term pressure has been alleviated, for this winter at least.

After all, contrary to George Osborne’s claims of largesse, average yearly increases in NHS spending amount to around 1.5 per cent across this spending review period, compared to an historical average of 4 per cent.

And the Kings Fund point out that spending as a proportion of GDP will likely fall by 1 per cent by 2020. As John Appleby, Chief Economist at the Kings Fund puts it:

Looking ahead, the NHS and social care are now locked into a decade-long funding squeeze which will see the largest sustained falls in spending as a share of GDP on both services in modern times. By the end of the parliament, the Barker Commission’s ambition of bringing public spending on health and social care up to 11-12 per cent of GDP will be a long way off. While this may be a good settlement for the NHS in the circumstances, there is no hiding how difficult the next few years will be for health and social care services.

Another key point from the review is that, while NHS England spending may have been protected, the wider Department for Health budget certainly has not, with further cuts to public health and clinical training.

Saddling NHS staff with further debts in the middle of a ten year period of pay restraint does not seem the most effective way to attract, recruit and retain the full time staff the health service desperately needs to fill vacancies and cut spending on agency staff.

Further cuts to public health will also weaken exactly the kind of local preventative interventions in areas such as obesity, sexual health and well-being that we need to manage demand on health services over the long run.

The NHS Confederation say:

the cut to public health in particular is hard to swallow considering the importance of investing now to keep people healthy and avoid building trouble for the future

Finally, we come back to social care.

As Alice Hood blogged on here, local authority funding is set to decline still further, with very different outcomes for local authorities with low council tax and business rate incomes who may be more dependent on central government grants that will be halved by 2020. The 2 per cent precept to council tax will, at best, raise £2bn by 2020 – against a predicted funding gap of closer to £8bn. The Local Government Chronicle points out that local authorities with high levels of council tax income could increase their social care spending by up to four times as much as more grant-reliant authorities through the precept. The postcode lottery for older people reliant on paid-for care is going to get a whole lot worse, with huge repercussions on local NHS services – Respublica predict additional costs of up to £3bn as a result.

Amanda Doyle, co-chair of NHS Clinical Commissioners reiterates this point:

To not seriously address the funding issues in social care will have a direct knock-on effect to wider NHS services and inevitably have a detrimental impact on what CCGs are able to achieve for their local patients and populations. It will also have implications on the role they can play in making the £22bn efficiency savings that the NHS needs.

Looking at the mixture of somewhat qualified relief and continuing concern that characterised the vast majority of responses from the health and social care sector this afternoon, I would say the overall narrative remains very much the same.