Austerity 2.0: why it’s critical for our health that the government learns the lessons of Austerity 1.0

On 17 November, the government will announce its Autumn Statement. Everything we know so far suggests it’s going to make grim listening for public services and all of us who use them. Spending Reviews and fiscal events present governments with choices and those choices have consequences. As someone who saw the impact of Austerity 1.0 on health and care at first hand, I think there are important lessons from that period that the new Chancellor must heed, as we head into Austerity 2.0.

Lesson one: recognise that health and care is a system

A key aspect to how public finances were managed for much of the 2010s was a focus on protecting funding for the day-to-day running costs of the NHS. This eventually led to an ‘NHS England ringfence’ within the Department of Health and Social Care’s (DHSC) budget. However, for much of the decade, the protection of NHS services was only protection relative to the cuts other public services faced, not funding rising in line with historical growth in NHS spending or demand for services.

This focus on protecting NHS services meant larger cuts elsewhere in the health and care system.

Austerity had a severe impact on the social care budget. Despite local authorities seeking to protect adult social care from the scale of cuts other local authority-funded services faced, spending on social care did not keep up with need over the decade. The result of this is what we see today in social care – high levels of unmet need, providers struggling to deliver quality care for the prices paid, delayed discharges from hospitals and a workforce crisis.

'This failure to continue to invest in prevention and early intervention leads to demand popping up elsewhere in the NHS, be that primary or urgent and emergency care.'

The public health grant suffered a fate similar to that of social care funding, with its value being eroded over the decade. In scaling back the grant, the government made short-sighted decisions to cut back small, but critical, investments in preventing poor health and services that evidence showed worked and prevented poor health were scaled back. This failure to continue to invest in prevention and early intervention leads to demand popping up elsewhere in the NHS, be that primary or urgent and emergency care.

Lesson two: understand the long-term implications of decisions

If protecting NHS England’s spending was intended to maintain quality, this didn’t work as the focus on day-to-day spending stored up problems in the medium and long term.

First, during Austerity 1.0 the government agreed to raid the capital budget, which pays for buildings and equipment such as scanners, to support day-to-day running costs. The result of this is that the cost of the maintenance backlog now stands at £10 billion, and patients and staff can see the impact of those decisions every day in roofs at risk of falling down and appointments being cancelled due to failing equipment.

Second, came the impact on the workforce. Public-sector pay restraint was a key feature of making the budgets add up in the early years of Austerity 1.0. Individual cost-cutting decisions – such as removing the bursary for nursing students or the maintenance grant – reduced student numbers (and was later reversed). And there was no protection for the training budget for doctors, nurses and allied health professionals, which meant that Health Education England had little medium-term certainty about the training pipeline it could afford. All this combined and slowly built to the workforce crisis we are facing today as short-term funding decisions had an impact on the long-term supply of qualified staff.

Lesson three: be realistic about the starting point of the system

In 2010, as austerity started, the NHS had lived through historically high spending rises for much of the previous decade, alongside a huge expansion in the workforce and modernisation of buildings and equipment. While local government had not had quite the same access to funding, overall the health and care system started the decade on a strong footing.

A new period of austerity comes not, as in the 2010s, on the back of period of sustained growth and strong performance, but after a double whammy of austerity - which saw waiting times increasing, A&E targets not met, access to social care declining - and the Covid-19 pandemic, from which the system has not yet recovered.

'We are now witnessing the impact of this with the health and care system facing unprecedented pressures...'

We are now witnessing the impact of this with the health and care system facing unprecedented pressures, life expectancy stalling and inequalities widening. In September, independent reports from the Institute for Government and CIPFA, and from the Care Quality Commission starkly set out a bleak picture of the current state of health and care. Any plans for austerity need to acknowledge this starting point in order to build credible and realistic plans that allow the health and care sector to continue to meet people’s needs.

Conclusion

Our health depends on an eco-system of services. The government’s approach to Austerity 1.0 sought to protect the day-to-day running of the NHS without recognising how other parts of the health and care system contribute to pressure on NHS services, and without keeping an eye on the long-term impacts of decisions.

The Chancellor is the former Secretary of State for Health and Social Care and former chair of the Health and Social Care Select Committee – can he approach the next period of austerity in a way that shows he has learnt the lessons of the past?