NHS Finance

02.03.20

The 2020 Budget: A ‘decade of renewal’ for health?

Dr. Eleanor Roy, Health and Social Care Policy Manager, CIPFA

The Budget is the opportunity for the government to follow through on its promises to turn the page on austerity and begin a ‘decade of renewal’ across the country. For the health sector, such ‘renewal’ is badly needed, especially for the NHS estate. While revenue funding for the NHS has already been put in place until 2023-24, this alone is not enough to meet the ambitions of the Long Term Plan set out in January 2019. A year on, clarity on funding for the interdependent areas of social care and public health remain unresolved and a clear multi-year capital settlement for the NHS is still elusive. 

Long-term solutions are needed to match the Long Term Plan. Quick fixes and headline grabbing announcements won’t put these crucial public services on a sustainable financial path going forward. In the absence of a long-awaited spending review, the budget is an opportunity to re-evaluate and take an evidence-based approach to infrastructure, prevention and ultimately the outcomes to be achieved – a chance to change the tone from the top.

This year’s twin reports from the National Audit Office (NAO) on NHS finance, underscore the reality of the worsening state of the NHS estate. Real terms reductions to capital limits and the short-term fix of transferring capital to revenue, have contributed to the eye-watering £6.5bn backlog maintenance bill. This short-term transfer means there is little available for investment in the NHS estate, and should stop being used as a solution.

The problem of access to capital funding has been exacerbated by the removal of the Private Finance Initiative (PFI) as an option to access private sector investment. Assuming a new model on private investment is agreed upon, it is vital that sufficient audit and assurance processes are put in place to ensure that private providers are acting in the public interest. The recent Brydon report into audit quality supports this notion.

Despite the fact that parts of the NHS estate are crying out for investment, there continue to be underspends in overall capital budgets. This, together with the significant levels of debt accumulated by some providers to fund capital, is a clear indication that capital funding is not reaching the areas where it is most needed.  The government have now long recognised the need to reform the capital system, yet along with multi-year allocations, this has been delayed by political events.

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The government’s Health Infrastructure Plan pledges to construct 40 new hospitals by 2030, effectively ignoring the larger need for comprehensive infrastructure investment across health and care services outside the acute sector. The NAO has highlighted that the areas identified for additional investment bear little relation to those in most need of maintenance.  The plan has also arrived before there has been a long-term capital settlement.  Announcing capital investment without certainty on the associated costs, or how it will be funded, hardly represents prudent financial management. Nor does it provide clarity for those planning the projects and associated budgets – ultimately at the cost of real value for money.

Public spending decisions must also factor in the potential impact on future financial sustainability. A greater focus on prevention in the health and care sectors would represent a true investment - using available resources to improve outcomes in the future. Like any other investment, the evaluation of preventative investments must consider all future costs and benefits. But, perhaps more importantly, the potential risks of not investing in preventative measures need to be focused on. This is unfortunately not always the case - spending decisions are often taken with too much emphasis on the short term, instead of considering the broader picture.

Making the prevention agenda a priority and focusing on outcomes across the health and care sectors has the potential to reduce demand, avoid future costs, improve financial sustainability and achieve greater benefits from the resources already available. The government has committed to greater focus on prevention. We urge this prevention ‘lens’ to be widened beyond the current focus on public health to take a wider view of health, wellbeing and their associated determinants.

Better services, better outcomes and financial sustainability are attainable, but only with real long-term change. Such change has the potential to positively impact millions of lives and reduce the immense stress on a health and care system that has been far too stretched for far too long. With the latest cabinet re-shuffle completed, the rockiest political events should (hopefully) be behind us. The necessary change has to come from the top, and when the budget is announced, we’ll all certainly be looking up!

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