From the TUC

NHS funding ‘reset’ – Austerity comes first

14 Jul 2016, by in Public services

In a stark comment given in an interview to the Health Service Journal this week, Jim Mackey, head of NHS Improvement made clear the new policy priority for the NHS – austerity comes first.

Ahead of a set of announcements for further belt tightening expected soon – what’s been termed the NHS financial reset – Mackey suggested in order to meet financial targets NHS providers should rein back additional staffing and take a more relaxed view of Royal College clinical standards which he described as merely ‘aspirational’.

Health unions and Royal Colleges alike have reacted with understandable anger.

Janet Davies of the RCN said that:

“this gives completely the wrong message to trusts, whose boards are responsible for the care, treatment and safety of their patients, by suggesting that finances are more important than patient care”.

Professor Neena Modi, president of the Royal College of Paediatrics and Child Health stated that

“the college wants to see patient care improve, and is shocked at the suggestion that clinical standards can be dismissed as ‘aspirational’ … I suggest that rather than accept this shabby suggestion, trusts that are struggling to make ends meet join in the public debate about the appropriate level of funding for UK health services, and the organisational structures that are most cost effective.”

It is widely acknowledged now that the NHS is facing an unprecedented financial crisis. Commissioners and providers ended 2015/16 with an aggregate deficit of nearly £2bn, a threefold increase on the previous year. Meanwhile, the £22bn savings target for 2020/21 set out in the Five Year Forward View seems to be as remote as ever.

The various attempts to patch up the finances, including “accounting adjustments” and balance sheet trickery, the diversion of much needed capital spend to revenue, caps on pay and agency spend and greater procurement efficiency set out by the Carter Review are beginning to run out, are not delivering to the scale required or were one-off measures that can’t be replicated in subsequent years.

The government is pinning its hopes on real efficiencies being delivered by a step change in the way that the NHS works, with greater collaboration and integration between primary, secondary, community care, mental health and adult social services. The Five Year Forward View set out its aspirations for new models of care. Much of it makes sense. But it’s a long term project and cannot be done on the cheap.

In an attempt to drive efficiency from the top, as well as to circumvent the ridiculous and dysfunctional fragmentation created by the 2012 Lansley reforms, NHS England has set up 44 Sustainability and Transformation Plans (STPs). STPs bring NHS commissioners and providers together with local authorities and other health and care providers to agree plans “based on the needs of local populations” that will “drive a genuine and sustainable transformation in health and care outcomes between 2016 and 2021” and help “build and strengthen local relationships”.

All well and good but in the planning guidance set out in December 2015, one of the nine “must do’s” that STPs are required to deliver this year is to “return the system to aggregate financial balance”.

So as well as delivering new transformative models of care, improving targets on A&E and ambulance waiting times, patient referrals, cancer waiting targets and mental health access and meeting the Conservative manifesto pledge for 7 day services, all at a time of rising demand resulting from a growing and ageing population, the STPs also need to turn round massive deficits in the space of 12 months.

The STP process could, in theory, be a positive development – promoting collaboration and integration over harmful and pointless competition and fragmentation at the local level. But they need the funding to work. And that money is not being made available. A whopping £1.8bn of the £2.1bn sustainability and transformation fund set up by the government to fund new initiatives aimed at delivering more efficient and effective ways of working has already been swallowed up bailing out provider deficits.

And more broadly, funding continues to flat line. Health spending in England will rise by £4.6bn in real terms between 2015/16 and 2020/21, an increase of less than 1 per cent per year – similar to the last parliament – while health care inflation is over 3 per cent. While NHS England’s budget will rise by £7.6bn, other health spending will be cut by £3bn, taking money out of the prevention and community initiatives that were supposed to be taking pressure of GPs and hospitals. And social care will continue to face a funding shortfall, despite moves to allow local authorities to increase council tax to fund social care. Health spending as a proportion of GDP is set to fall by 1 per cent over the lifetime of this parliament – or possibly further bearing in mind that the Health Foundation predicts a £2.8bn fall in the Department of Health budget by the end of this parliament as a result of a post-Brexit economic slowdown.

And as the figure below from the Health Foundation shows, the NHS spending profile set out in the Spending Review of 2015 shows a financial cliff edge from 2017/18.

NHS spending per head 2010/11 to 2020/21

NHS spending per head in England 2010/11 to 2020/21 – Health Foundation, 2016

So the STPs have been set a seemingly impossible task and something has got to give. Its either patient care or it’s the money. NHS leaders have opted for the latter, making clear that the first priority for STPs is to get that financial balance.

In a new report on NHS finances, the King’s Fund delivers a number of home truths, among their key messages:

  • The principal cause of the deficit is the fact that that funding has not kept pace with the increasing demand for services.
  • Cuts in staffing and reductions in quality of care are inevitable if the government’s priority is to restore financial balance.
  • Programmes to implement new models of care and transform services offer significant opportunities to improve care but they need time and investment and will not deliver savings in the short term.

The King’s Fund report calls on the government to review its priorities for the NHS to ensure that they can be delivered within the resources available, calling for “realism about what the NHS can achieve within the funding allocated to it” and “an honest debate with the public about this”.

Of course, another way of putting this is that the government should have an honest debate with the public about the realistic level of resources its needs to ensure that the NHS can deliver what we want it to. A commitment to raise government spending on the NHS as a proportion of GDP to levels achieved by other leading European nations would be a good place to start.

But any hope that the Chancellor’s abandonment of his budget surplus target for 2020 represents and easing of austerity should be tempered by the new Prime Minister, Theresa May’s assertion that the government should “continue with its intention to reduce public spending and cut the budget deficit”.

2 Responses to NHS funding ‘reset’ – Austerity comes first

  1. Justin
    Jul 15th 2016, 2:22 am

    What this government needs to realise is that the the assessments carried out by the dwp wca process which targets mh and vunerable adults etc are then having a impact on them and is then increasing the burden on the nhs as they are then going back into the system, this targeting of vunerable adults using this process which is highly flawed has to stop and the payment by results system for the wca system has to stop until then people will go back into the system for whatever reason and the only people that are to are the dwp and there policy makers and until you deal with that problem bed occupancy is on the way up, more people going into a system that is spiralling, how do you deal with it well there is a clue in my statement it is called the dwp and there policy makers and wca assessment process and i am not a professor to have to tell you what is blatanly obvious, these ministers call themselves intelligent lets see if they can work the obvious out without having it spelt out for them letter by letter, not to hard is it!!!

  2. We need a properly funded NHS – make your voice heard
    Aug 11th 2016, 10:55 am

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