Direct Covid-19 spending
The figures on government Covid-19 spending were truly eye-watering.
The Spending Review confirmed more than £50 billion for health and care services in 2020/21 in direct response to Covid-19. This includes spending on NHS Test and Trace, mass screening, vaccine procurement, personal protective equipment (PPE), use of independent sector resource and infection control measures (see Figure 1).
And more than £20 billion of planned spending has already been earmarked for 2021/22 (see Figure 1). Alongside more spending on NHS Test and Trace and PPE, this includes the £3 billion ‘NHS recovery package’ for 2021/22 that was heavily trailed before the announcement. This non-recurrent funding (ie, it is not added to the health spending ‘baseline’ for determining funding in future years) includes £1 billion to tackle growing waiting lists for planned care, £500 million to support mental health services, and £1.5 billion to ease existing pressures in the NHS caused by Covid-19 (including the lower productivity in health care services caused by the pandemic).
And as large as they are, these sums are not the final word on Covid-19 spending in either 2020/21 or 2021/22. HM Treasury has said that further funding for ‘operationally necessary direct Covid-19 costs’ will be agreed with the NHS early in 2021. And there will also be unfinished business for social care, with, for example, infection control funding for 2021/22 to be settled.
If the size of direct Covid-19 spending was eye-wateringly large, the Spending Review content on public health services was eye-watering for different reasons. In a 122-page document, details on public health funding for next year were conspicuous by their absence.
The Spending Review simply noted that the public health grant will ‘be maintained’. However, it is unclear whether this means ‘maintained’ in cash terms or in real terms (adjusted for inflation), or something else entirely.
With rising costs – including from a pay rise for health care staff in 2021/22 – even maintaining the grant in real terms would mean councils would have relatively less spending power in the coming year. Little wonder that some directors of public health feel ‘kicked in the teeth’.
We can only hope that the government’s promise in paragraph 6.9 to ‘set out further significant action… to improve the population’s health in coming months’ will both materialise and be backed by cash.
Local government and adult social care
The government has put forward a funding package in 2021/22 that aims to maintain care services while keeping up with rising demand and recovering from the impact of Covid-19. The package needs some unpicking.
First, there is £3 billion to help local authorities deal with the pressures of Covid-19. This includes additional grant funding and compensation for the Council Tax and Business Rates revenue that was lost in 2020/21 because of the pandemic – this 2020/21 funding hole would have otherwise been made up through local authority budgets in 2021/22 and beyond.
On top of the £3 billion, local authorities will ‘have access to over £1 billion of funding for social care’ – but ‘having access’ is not quite the same as ‘having’. There is definitely £300 million of new grant funding for social care – though this will be split to support both adult and children’s social care. The rest of the ‘over £1 billion’ includes up to £790 million that could potentially be raised by local authorities being able to levy a 3 per cent adult social care precept. However, the precept raises different amounts of money in different parts of England (though this could be counterbalanced by allocating more of the £300 million grant funding to areas that could raise less through the precept), adds financial burdens on households if it is levied, and is poorly related to levels of need for social care.
Then there are existing pots of money that have been maintained into 2021/22. These include the £1 billion grant funding for 2020/21 originally announced in the 2019 Spending Round, and the £2.1 billion of funding provided to local authorities through the improved Better Care Fund. The Spending Review also extends the Disabled Facilities Grants and Care and Support Specialised Housing Fund (which sit in DHSC’s capital budget) to help people live independently in their own homes for longer by supporting adaptions to people’s own homes or promoting the development of specialist affordable housing to meet the needs of older people and adults with disabilities or mental health problems.
There is also an extra £254 million of day-to-day spending and £87 million of capital investment to support people who sleep rough and those at risk of homelessness during Covid-19. This addition money raises total resource funding to £676 million in 2021/22 to support for these groups.
The government has also raised the National Living Wage by 2.2 per cent from £8.72 to £8.91 from April 2021. While any increase is welcome for social care staff who have been on the front line throughout Covid, this increase is below the £9.21 wage the Low Pay Commission consulted on earlier this year, and even at this level it will add to the cost pressures on social care providers.
And finally – back to words not numbers – the language has changed from ‘fixing social care’ and ending the ‘injustice of care home funding’ to providing ‘sustainable improvement’ of the sector. We can only hope that this doesn’t reflect a watering down of the government’s ambition to deliver the reforms it promised, and instead reflects the difference between campaigning in poetry and setting spending plans in prose.
Capital investment in health services
Capital investment in the NHS has been on a bit of a rollercoaster over the past decade. But this Spending Review confirmed that the investment momentum remains upwards.
The spring Budget 2020 initially set the Department of Health and Social Care capital budget at £8.2 billion in 2020/21. This Spending Review now confirms planned capital spending is expected to rise to £11.1 billion in 2020/21.
Although capital spending plans then fall to £9.4 billion in 2021/22 (in cash terms), this fall is partly because the high-water mark in 2020/21 includes a £1.8 billion investment to adapt the NHS estate for Covid-19 (see Figure 2), including measures such as expanding A&E waiting areas to support social distancing, and procuring ventilators and adapting infrastructure to supply oxygen to critically ill patients. The capital budgets in 2021/22 will include new spending on diagnostic machines, such as MRI and CT scanners, and replacing outdated dormitory accommodation in mental health providers.
The autumn Spending Review also put more meat on the bones of some previous announcements. In October 2020, the Prime Minister announced £3.7 billion would be allocated to support the '40 new hospitals' building programme. This Spending Review now confirms the year-by-year spending profile of both this funding and £1.7 billion of funding to upgrade existing hospitals between 2021/22 and 2024/25. Spending in both these areas is included (ie, not in addition to) the £9.4 billion (cash terms) core capital spending in 2021/22.
Because capital budgets for 2022/23 and beyond have not actually been set yet, it is hard to assess just how generous this multi-year funding will prove to be. In recent years the NHS’s capital strategy has been described as ‘like driving in fog’, and despite the general upwards trend in investment some heavy wisps of fog remain.
Finally, this Spending Review promised that £4.2 billion would be provided in 2021/22 for ‘NHS operational capital investment’. This does not mean there will be a massive £4.2 billion injection into capital budgets next year. Rather, it means that the sum of money to cover day-to-day operational investments like hospital refurbishments and maintenance (which are typically self-financed by NHS organisations of financed by DHSC funding), will be set at £4.2 billion in 2021/22.
Before the Spending Review a serious head of steam had built up to provide the NHS with medium-term certainty over education and training budgets for the NHS workforce.
For example, in her evidence to the July 2020 Public Accounts Committee, Prerana Issar (Chief People Officer, NHS England and NHS Improvement) highlighted the importance of the Spending Review for supporting new plans to grow and retain NHS staff: ‘The link with the Spending Review is that investments in supply [of NHS staff] especially need to be predicated on a multi-year view and for that we need multi-year spending commitments.’
In the end, the Spending Review did not deliver a comprehensive multi-year boost to NHS workforce budgets that we and others argued for. There is only a one-year £260 million boost to Health Education England’s budget in 2020/21. This is new funding that is in addition to previous funding for re-introducing cost of living grants for clinical staff in training and the other workforce funding contained in the £3 billion recovery fund.
There are still a few points of workforce funding detail that remain unclear.
First, in the autumn Budget 2019, the government increased Health Education England’s budget by £150 million in 2020/21 to support continuous professional development (CPD) opportunities for nurses, midwives and allied health professionals. At the time it was said that if this £150 million was matched by the same level of investment in 2021/22 and 2022/23 it would provide £1,000 per head in total training budgets over this three-year period.
For the moment, whether and how these CPD budgets will be protected in 2021/22 and beyond has not been confirmed. This is particularly apposite as reports grow of clinical staff having fewer chances to take up training opportunities because of the pandemic, which is likely to create a bulge of demand for training in future years.
Second, although the government has said pay for NHS staff will not be subject to the public sector pay freeze, the actual level of pay uplift for NHS staff (which includes all staff covered by the national pay awards, not only doctors and nurses) will not be known until next year when the respective NHS pay review bodies make their recommendations to government. But the Spending Review documents make two sobering notes – first, that the government will take these recommendations into account but is not bound by them, and second, that in setting any rises the government will need to take into account the challenging fiscal and economic context.
Even once these pay rises are agreed, questions will be raised over whether new funding will be provided to back the pay rises or whether the Department of Health and Social Care will have to absorb these extra costs by making cuts to other parts of its budget. And health and care staff on the front line who are not part of Agenda for Change – including some staff in community providers – will once again wonder whether any funding can be found to boost their pay in line with their frontline colleagues.
With fundamental reform of social care funding delayed again, the link to pay and conditions for social care staff is also likely to become a flashpoint, with the Migration Advisory Committee noting in September 2020: ‘We remain particularly concerned about the social care sector, which is so central to the frontline response to this health pandemic, as it will struggle to recruit the necessary staff if wages do not increase as a matter of urgency.’ If left unmanaged, this could end up increasing pressure on social care services if staff are incentivised to seek employment in the NHS.
Total health spending
Finally, to total health spending in 2021/22. And, on the one hand, not that much has changed. There is already a five-year funding deal agreed for 2019/20 to 2023/24 to cover spending within the NHS Mandate and to support the NHS long-term plan.
Taking this as a fixed starting point, the Spending Review has filled in the blanks by setting spending for other portions of the resource (ie, day-to-day spending) health budget. This will see resource spending rise by £6.6 billion in cash terms to £147.1 billion in 2021/22.
With NHS spending set at £136.1 billion, this leaves roughly £11 billion of non-NHS health spending for core services in 2021/22. Included in this is approximately £1 billion of funding to make progress on the government’s manifesto commitments (including 50,000 more nurses and an additional 50 million appointments in general practice a year). This is not ‘new’ funding from this Spending Review, but merely confirms how much of the £5.4 billion multi-annual funding allocated in the spring Budget 2020 for manifesto commitments falls in 2021/22.
But, of course, everything has changed. Once the additional costs of responding to Covid-19 are factored in, total Department of Health and Social Care spending (including both capital and resource spending) in 2020/21 rises to a colossal £201.7 billion. The figure for 2021/22 sits at the smaller, but still colossal, £176.7 billion (cash terms, or £181.8 billion in 2021/22 prices – although there are some unusual movements in the standard measure of inflation because of Covid-19), and this figure is only likely to increase further once the fuller costs of procuring and delivering vaccines and mass testing programmes become clear.
If health spending had continued to increase at its long-run average 3.7 per cent level from 2019/20 onwards, we might have expected health spending to top £200 billion by 2030. To see this level of spending brought forward by a decade (even if it will not be sustained) is yet another signal of how Covid-19 has ripped up the health spending rulebook.
The planned ‘fiscal trilogy’ for 2020 began with a spring Budget that promised to give the NHS and public services whatever they need to tackle Covid-19. That promise has seen health spending rise from around £150 billion in 2019/20 to more than £200 billion just a year later.
But alongside these colossal and Covid-19 dominated figures, this autumn Spending Review brought some smaller positive surprises. There are some areas of health spending that will not break the bank but may make a positive difference to health and care services, including funds to replace outdated dormitory accommodation in mental health providers, boost green social prescribing initiatives and improve safety for mothers and newborns. And after years of underinvestment in the NHS estate, successive fiscal events have seen plans for infrastructure investment rise again.
Despite these positives, there are opportunities that have not been taken. These include the absence of multi-year workforce funding at a time when the health and care sector remains in the grip of a workforce crisis; the startling lack of clarity over public health funding at a time when the focus must surely be on reducing health inequalities and levelling up; and the continued delays to reform of adult social care funding that long predate Covid-19.
The future seems set to bring only greater uncertainty from both Brexit and Covid-19. The UK economy is already expected to shrink by 11.3 per cent this year (the largest fall in more than 300 years) and unemployment is expected to peak next year with 2.6 million people out of work. And even as the UK braces itself for rising unemployment, poverty and wider economic factors that will inevitably have an impact on the mental and physical health of the population, the Office for Budget Responsibility notes that reductions in resource envelopes for 2022/23 will ‘set up another challenging spending review next year’.
The Chancellor noted in his Spending Review speech that the UK’s health emergency is not yet over, and that the economic emergency has only just begun. The Spending Review may be the end of 2020’s fiscal trilogy then, but as one senior Treasury official has noted, it is not the end of the story.
|Direct Covid-19 spending|
|Local government and adult social care|
|NHS capital investment|
|Health revenue (day-to-day) spending|
|Other relevant spending|