NHS funding: Below the surface

Source: NHE July/August 2018

Chris Hopson, chief executive of NHS Providers, welcomes the long-term funding settlement of £20.5bn for the NHS by 2023. But diving below its surface, we must ask: can the settlement really deliver?

Theresa May has delivered a 70th birthday present for the NHS. But how generous is it? How nervous should we be about the strings that have been attached? And what are we actually going to do with the present – what should we spend it on, and how should we draw up the plan that determines that? 

The prime minister’s funding settlement of an extra £20.5bn by 2023 equates to an average annual rise of 3.4% above inflation per year for each of the next five years. Compared to funding increases the NHS has received over the last eight years (just above 1% on average), the funding of other public services and the wider economic context, it is a very welcome birthday present. 

NHS Providers has argued for some time that the NHS is overstretched and under-resourced, so we welcome this extra investment. 

But if the 3.4% is compared to the long run, average funding increases for health (3.7% annual real-terms increases from 1948 to date) and what many experts predicted the NHS needs, the questions begin to emerge – and one might become more cautious. 

Using shorthand, the NHS needs annual rises of 3.3% to just stand still, given rising cost and demand. It needs annual rises of 4% to recover performance and close gaps following a decade of austerity, and annual rises of 5% to consistently transform in the way envisaged in the Five Year Forward View (FYFV). 

It’s also worth remembering that the last time the NHS went through a major transformation – between 2000 and 2010 – NHS funding increased by 6% a year on average. So our level of joy at receiving this present will depend on which comparisons are made.

So, what can we buy with the birthday present?

This is where need to be realistic. After an eight-year funding squeeze, sizeable performance and financial gaps have opened up. They need filling. We also have a pay rise to fund, and that’s before you start thinking about transforming the NHS to join up care and enhance NHS performance.

A range of commitments have been made by the prime minister and the former health secretary alongside this extra funding. These ranged from eliminating provider deficits and recovering performance standards to driving a technology revolution and delivering much better cancer and mental health outcomes.

The underlying question is whether the NHS can actually recover its performance and finances; close the workforce gap; afford a pay rise; keep up with rapidly rising cost and demand; transform; and deliver significantly enhanced performance, all on average annual funding rises of 3.4% when we need funding increases of 3.3% to just stand still. 

The chancellor has acknowledged that taxes will need to rise to help fund this settlement. So, understandably, the government will be keen to show the taxpayer the exciting things their extra taxes will buy – but we must be careful here. Excessively inflating expectations risks locking the NHS into the same ‘failure to deliver an impossible task’ that has blighted us for the last four years.

This is why the other side of the equation – what the NHS can deliver for the settlement – is now so important. The NHS 10-year plan must be ruthlessly realistic and set a deliverable ask for the NHS frontline. Honesty about how quickly we can recover performance and financial gaps will be vital, with a strong emphasis on how we create a robust plan to quickly tackle current workforce shortages. Hard choices between attractive, desirable, and competing priorities will be essential.

That’s why how the plan gets created is so important. Trust leaders will be accountable for the plan’s delivery on the ground. But, as we found out with the plan that followed the FYFV, it’s difficult to be accountable for something which you believe sets an impossible task and you’ve had no hand in creating. That’s why the trust leaders we represent must be deeply involved in developing the plan and be able to assure themselves that it really is deliverable in their trusts. 

A good example of where providers must be involved is the level of productivity and efficiency gains the NHS frontline can be expected to make over the next five years, where we must avoid repeating the excessive optimism of the FYFV. The government believes that recent projections of efficiency savings at the average of the last 20 years (0.8%) are too conservative, with the average of the last five years (1.6%) more appropriate. 

The Carter Review and the Getting It Right First Time programme will help here, as would major investment in the basic underlying IT infrastructure that too many trusts lack. But it’s only provider leaders who can, for example, identify what support and investment would be needed to reach a more ambitious level of gain.  

Another key question is what happens to the health and care budgets left out of the settlement – the social care, public health and training budgets that sit beyond the core frontline NHS spend. We welcome the “protection commitments” in these areas, but they must turn into concrete positive financial outcomes. If those budgets are held at current levels, the settlement is actually only an average 3% increase. 

We are also worried about the potential time lag for a Spending Review process whose first year will be 2020-21. What happens to an increasingly fragile social care sector in the meantime?

Finally, we must ensure the plan is forward looking. The vision in the FYFV remains compelling: rapidly moving towards new models of care, with a significant investment in community services and primary care. If we just spend this extra money in the same way that we currently do, we will miss a big opportunity.

So whilst we welcome the birthday present, we must also be realistic and honest with the taxpayer, patients and NHS staff about how far it really will go and what the NHS can deliver in the 10 years before its 80th birthday. 


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