The Autumn Budget 2022: what was announced and what does it mean for health and care spending?

Fiscal events may have come thick and fast in recent years but they are still important events that have a significant bearing on the health and care sector. Let’s take a look at what this year’s Autumn Budget means for health and social care.

Summary

Summary of main health and social care announcements from the Autumn Budget 2022

NHS spending

The headline announcement on the NHS was a £3.3 billion cash terms boost in each of the next two years (2023/24 and 2024/25) to NHS England’s budget.

There are a few wrinkles that mean you can’t simply add £3.3 billion on to previous plans for NHS England’s budget in 2023/24 and 2024/25. That’s because NHS England’s budgets in future years have been adjusted downwards to remove compensation for the increased employer National Insurance costs that would have been incurred if the Health and Social Care Levy had been maintained.

And NHS England’s budget has also been adjusted upwards – outside the £3.3 billion cash boost – because it will receive some additional funding through the increased Better Care Fund that was included as part of announcements around adult social care.

The net effect of all this is relatively small, and the £3.3 billion boost remains the headline with NHS England’s budget rising to £160.4 billion in cash terms in 2023/24.

This £3.3 billion annual boost is broadly trying to achieve two things: to protect the NHS from inflationary pressures and to give the NHS more resources to improve its performance.

Now, it was only last month that NHS England said it needed up to £7 billion of extra funding in 2023/24 to cope with rising pay and price inflation. So why could the Chancellor say his £3.3 billion boost had the support of NHS leaders, who thought the package was ‘good enough to fulfil their key priorities’?

In part this is because inflation forecasts are now lower than when NHS England issued its warning. And in part it’s because NHS England’s figures included assumptions about NHS staff pay awards increasing in line with inflation and private sector earnings in 2023/24. Because the government has only just started the process of determining the staff pay award for next year, the £3.3 billion will primarily tackle the known ‘non-pay’ elements of inflation for the next two years.

Of course, this also leaves open questions about the level of pay increases for 2023/24 the government will offer, and whether the NHS will be given additional funding to cover those costs (alongside other potential cost increases because of further fluctuations in inflation and rates of Covid-19). Because of this uncertainty, local NHS integrated care boards (ICBs) may not immediately see the full benefit of the £3.3 billion if NHS England understandably chooses to hold back some of this funding in central coffers to mitigate these risks.

Turning to performance, the Budget documents also set out the government’s ambition to improve ambulance response times for serious health conditions to 30 minutes on average over 2023/24; deliver year-on-year improvements in A&E waiting times over the next two years; and improve access to general practice so everyone who needs an appointment gets one within two weeks.

A quick review of the plunging NHS satisfaction recorded by the recent British Social Attitudes survey, and recent trends in A&E and ambulance performance suggest that the government’s ambitions on performance are clearly understandable. Waiting times matter to patients and they matter clinically. And even achieving the new 30-minute ambulance milestone would mean patients are still waiting nearly twice as long as they should under existing national targets. But at the same time, a review of the recent performance trends suggest this level of performance improvement is unlikely to be delivered even with the extra funding the government has provided (Figures 2 and 3).

Wider health spending

Important areas of spending still sit in the wider Department of Health and Social Care (DHSC) budget, rather than NHS England’s. These include budgets for the staff education and training; capital investment in buildings and equipment; and investment in public health services. After the Autumn Budget we know the path of wider health spending overall between now and the end of this parliament (see Figure 3).The total DHSC budget will now rise by 1.2 per cent in real terms on average over the next two years – far below the 3.6 per cent long-term average for UK health spending (with real terms increases also being less generous than they seem because the traditional measure of inflation for public spending – the GDP deflator – underestimates some of the inflationary pressures health care organisations will face).

The Budget had little to say on the individual spending areas that lie within the wider DHSC budget (see Figure 4). On capital funding, the government repeated its commitment to the new hospital programme – without specifying whether funding for the programme has changed. Quite what will happen to the public health grant and Health Education England budgets for the education and training of clinical staff will only become clearer as we approach the 2023/24 financial year.

Adult social care spending

As always, adult social care spending is a more complex proposition than NHS spending.

The government has made available up to £2.8 billion more funding in 2023/24 and £4.7 billion in 2024/25 in cash terms. This funding will come from three main sources (see Figure 5).

So, if that is where the money comes from, what is it meant to be spent on? In part these decisions are tied to the mixed funding sources that include central pots of funding that have strings attached and other funds that are more under the local discretion of councils. In 2023/24, for example, roughly one-third of the funds will be primarily aimed at tackling delays in discharging patients from hospital. It is likely that councils will use the funding that is more under their discretion to ensure other important areas of adult social care services, including services for working-age adults, receive the support they need.

It seems a lifetime ago that the government used the Autumn Budget 2021 to promise £1.7 billion over three years for adult social care from 2022/23 to 2024/25. Announced at the same time as the funding for changes to social care charging, this £1.7 billion aimed to support wider improvements in the social care system by improving the skills, qualifications and wellbeing of staff in the care workforce and helping the sector adopt digital tools and technology to improve the quality of care. This investment will continue over the remaining two years – with only the social care charging plans delayed and funds diverted.

This was a Budget that – in stark contrast to the September mini-budget – had the pitch thoroughly rolled beforehand. And because rumours of the delayed social care charging reforms had been circulating for some weeks, this may have taken the sting out of tail when the delay was finally confirmed. But if the reforms are eventually abandoned once again rather than delayed by two years, this may end up being the most significant negative legacy of this Autumn Budget and belie the Chancellor's claim that his government will not ‘leave our debts to the next generation’.

Wider reform

In another break with tradition, the government also made two key health policy announcements that were not strictly fiscal in nature.

First, there will be an independent review of how ICBs can best work efficiently with ‘autonomy and accountability’. Given these boards were only formally established in law in July 2022, the earliness of this review reflects how central they will be to the Chancellor’s ambition to deliver ‘Scandinavian quality alongside Singaporean efficiency’. Though it is worth noting that health spending in Denmark, Norway and Sweden is generally higher than the UK (see Figure 6).

And in the surest sign that this was a Budget delivered by a Chancellor who has been in post for little over a month but was the longest-serving health and social care secretary in history, the government also committed to publishing a comprehensive workforce plan with independently verified workforce forecasts. Quite what this means in practice – including who will independently verify the forecasts – is unclear. But it would be easy to give the Chancellor less credit than he deserves for this decision, which could end up as the most positive legacy from all the health and care announcements the Budget contained.

The picture beyond 2024/25

Much of the focus for health and social care Budget commentary was on the next two years – 2023/24 and 2024/25. But the Budget did include some indication of what the picture for health and social care services might be up to 2027/28. And this picture was far from rosy.

Capital spending for the government as a whole will be held flat in cash terms from 2025/26 to 2027/28 (and so will be eroded by inflation as time goes on). Day-to-day (or ‘resource’) spending for government departments will growth at 1 per cent a year in real terms over this period. And with these conditions in mind, the Office for Budget Responsibility’s economic and fiscal outlook includes an assumption that day-to-day spending on the NHS in England will grow by 3.1 per cent a year in real terms on average between 2024/25 and 2027/28.

Now, there is clearly a lot of uncertainty here. So much so that some commentators think that spending forecasts beyond 2024/25 are largely irrelevant because spending plans will be adjusted before then, or a general election will change the path of public spending. But it is clear that the funding climate beyond 2024/25 will be appreciably cooler. And that chill could affect investment decisions in preceding years – including whether to train more staff or invest in NHS buildings and equipment. As the Chancellor has often said in recent days – you can’t spend money you don’t have.

Conclusion

Overall, the Autumn Budget has provided a funding settlement for health and care services that is better than expected but leaves some problems coming further (but not that far) down the track.

Health and care spending will continue to grow at a time when other government departments will have their budgets held broadly flat at best. Capital budgets may not have been turbo-charged but they have not been raided either. Social care charging reforms have been delayed once again, but the savings from doing this will be recycled rather than lost to the sector. The much-heralded NHS workforce plan will be published and scrutinised in public. And at a time of rising inflation, the NHS has been protected against some – if not all – the cost pressures it will face over the next two years.

In the run-up to last week’s Autumn Statement, the Chancellor Jeremy Hunt was keen to emphasise that tough choices lay ahead for the public finances. He made some of them in the fiscal statement. But with nurses planning to strike, a deep recession, and the threat of Covid-19 and wider pressures on services still uncertain, more tough choices await him.