Comment

Under the surface of the funding settlement

James Rimmer, chief finance officer and deputy CEO of NHS Southampton City CCG and co-chair of the NHS Clinical Commissioners (NHSCC) Finance Forum, analyses the reality of the health funding settlement.

In the Budget, the chancellor confirmed that the NHS will receive a real-terms funding increase of £20.5bn over the next five years, a generous settlement when compared to other government departments, and one that we are very happy to receive.

However, a new infographic from NHSCC, NHS Confederation and NHS Providers shows that, sadly, this will not meet the estimated financial pressures over this period. This is the first time that the NHS system – commissioners and providers – have come together to highlight these challenges, reflecting the increasing collaboration that is taking place across the country.

Drawing on the recent report from the Institute for Fiscal Studies and the Health Foundation, we estimate that by 2024 there will be an approximately £10.5bn shortfall between the allocated funding and what would be needed to meet demographic and other pressures. In many ways this is a great success story, as life expectancy has been increasing since the NHS was established, but this does increase demand on health services. The settlement is also well below what the authors of that report assessed as being required to maintain the status quo (£28bn) or deliver a modernised NHS (£36bn).

So, what does this mean? Most importantly this means that the NHS will need to spend every single pound very wisely, but in addition will need to continue to deliver considerable efficiency savings. Despite CCGs delivering £5.96bn and NHS trusts delivering £9.2bn of efficiencies over the last three years, the overall underlying deficit remains at £2bn. We know that in many areas the low-hanging fruit has been harvested, and now harder choices are having to be made about service availability to ensure we remain in balance.

This includes restricting the availability of some medicines that can be easily purchased over the counter at a reasonable cost, and ensuring that less clinically effective interventions are not performed for people who would not benefit. The funding settlement, linked with ambitions to improve provision of services for cancer, cardiovascular, respiratory, primary, and mental health, will actively require commissioners and providers to make these difficult decisions to ensure that funding is available for higher-priority areas.

The NHS, as ever, is up for the challenge, but to make this work we need a realistic long-term plan. This plan must be developed with meaningful engagement of those working in the NHS and the public. It needs to identify some of the things that we could stop doing to remain sustainable and outline clear priorities for what the NHS can realistically achieve with the funding available. It will also be impossible to achieve if we do not tackle the crisis in social care, so we absolutely welcome the government’s announcement of additional funding and look forward to seeing a long-term solution in the forthcoming green paper.

Key to this will be supporting, growing and valuing the current and future workforce, as without it we stand no chance of meeting the forthcoming pressures. We also need to ensure that collaboration becomes the new normal by removing regulatory and financial barriers to local integration. We have seen in the payment reform proposals from NHS England and NHS Improvement the first steps on this journey, but this must be more clearly defined.

Finally, the recent announcement from the secretary of state of an increased national focus on prevention, coupled with the future release of a government strategy, is a potential watershed moment, and must be recognised in next year’s Spending Review. The future pressures are clear, and we must now plan together how to deploy the additional funding to most effectively address them.

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