John Appleby: Reaction to the Spending Review

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  • Posted:Thursday 26 November 2015

John Appleby's response to the 2015 Spending Review includes his thoughts on NHS and Department of Health funding, social care and what we spend on health and care as a percentage of our national GDP.


So what does a spending review mean for the NHS? Well, for NHS England, controlling about £101 billion worth of a budget of about £116 billion, it looks like a good deal, it looks like an extra real increase of £8 billion by 2020, that's as the government has promised.  The thing is, when you look at the whole of the NHS, so there is about £15 or £16 billion spent on a whole range of things from training public health and so on, the increase doesn’t look quite as good, in fact there is a big chunk of that £8 billion, possibly up to £3 billion is being funded from cuts over five years to other parts of the Department of Health and other parts of the NHS.  Now we don’t know the full scale of those cuts or where they will come, so it’s not all new money, that's the first thing to be clear about.

Social care is also in the spending review. What we don’t know about social care are actual budgets, it operates in a different way.  We only know how much is spent on social care after it is spent.  It’s not like the whole of the country is set a grand budget, it’s up to local authorities and it’s up to demand and so on, so there are a lot of decisions that are going to be taken locally about social care funding.

Now what the government have announced in the spending review around social care is very interesting actually. First of all the NHS will still be making some transfers to social care each year, there will be some new money coming in centrally to social care as well, but building up quite slowly to around £1/£1½ billion by 2020.  This is on a budget currently of around £15 or £16 billion but also the government are encouraging local authorities to set a precept of around two percent around council tax to be spent specifically on social care.  Now it is up to local authorities whether they do this or not, but on the assumption that they do, plus the current ability to raise something like 1.99 percent on their local taxes, this could give local authorities an extra £2 billion or so by 2020 overall to spend on social care.

Now there are an awful lot of assumptions in there so we really don’t know yet quite how that will work but it looks a slightly better deal for social care than we anticipated. My biggest concern is partly around social care, we don’t know quite how the actual decisions on the ground will work out with local authorities.  The rest of their funding is going to be very heavily squeezed again.  On the NHS, in fact the deal now over the whole of the NHS looks about the same as the deal was to the last parliament so the real increase in overall budgets for the NHS over the next five years, per year, are a fraction under one percent which is almost what it was in the last five years.  So in a sense the NHS has got almost exactly the same deal as it had in the last five years.  The big difference is the NHS is not starting from the same position so things are looking much bleaker this year than they did in 2010, so NHS organisations are overspending, we are looking possibly at a £2-3 billion deficit this year – that wasn't the case in 2010.  Next year there is an issue around NHS pensions, the NHS is going to take on some of the costs of that, that's a billion pounds possibly extra costs next year, what with the deficits as well, so it’s a much more difficult position that the NHS is starting from now and yet its funding increases are broadly the same as we've had over the last five years.

So that's the big worry. The other thing I would add is beyond this parliament we've really got to start thinking about how we fund health and social care together.  We want to, as a society, have some agreement about what share of the GDP cake, what share of what we earn as a nation, do we really want to put into health and social care.  I mean if these figures turn out to be the case for health and social care, our spending as a percentage of GDP will decline over the next five years.  I'm not sure that's what we want and I'm not sure that's what the public wants.


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