The Comprehensive Spending Review – what more for health and care spending?

On 27 October 2021 the Chancellor of the Exchequer will deliver the Comprehensive Spending Review. This will detail the government’s plans for public spending over the coming years.

While recent announcements have set out budgets for parts of the NHS and for social care reform, there remain some important areas for the Comprehensive Spending Review to clarify. In this briefing we set out the challenges and consider steps the government could take to address them.

Key messages

• Waiting lists and waiting times were rising before Covid-19, but the pandemic has accelerated their growth. Reducing the size of the elective backlog is now one of the most pressing challenges facing the NHS. Similarly, social care, public health, mental health and primary care are all facing large backlogs of demand and unmet need. While recent funding announcements have been directed at addressing the elective backlog in the NHS, it is a problem across the whole health and care system.

• The new NHS funding comes with specific targets to increase activity to reduce the backlog. This is a sensible approach but there is a significant inequalities issue here, as our analysis shows that those living in the most-deprived areas are nearly twice as likely to wait more than one year for treatment compared to those living in the least-deprived areas. To help reduce inequalities, government should work with the NHS to implement the activity target in a way that allows appropriate local flexibility to address health inequalities.

• The health and care workforce has faced great pressure as a result of Covid-19, though it is important to remember that there was a workforce crisis across the NHS, social care and public health before the pandemic. Allocating specific funding to a multi-year workforce strategy to invest in training, development and wellbeing should be a priority for the Comprehensive Spending Review. Without it there is a risk of increased attrition rates, more endemic burnout and stalling recruitment rates, which could undermine efforts to reduce the current backlog and deliver the government’s manifesto commitments.

• Years of constrained capital investment have led to a growing backlog of safety issues with NHS buildings and equipment. Even now, NHS leaders do not know how much capital investment they can expect in the coming years, which hampers their ability to plan improvements to NHS buildings and facilities to improve productivity and patient care. The government has yet to deliver on its promise to set out a more coherent and sustainable multi-year capital investment plan.

• The public health system has been overlooked in recent spending announcements, and several years of cuts mean that the public health grant is now £1 billion less in real terms per capita compared to 2015/16. Over the past decade life-expectancy improvements began to slow – and in fact went into reverse in 2020, as a result of the Covid-19 pandemic – and health inequalities have widened. Urgent action is needed to support public health services and help ensure an equitable recovery from the pandemic.

• After years of inaction, the government has taken some positive first steps on social care reform. However, the sector is far from being ‘fixed’, and to help manage current pressures, improve access to care and support the social care workforce the Comprehensive Spending Review will need to increase core social care funding significantly before reforms start to be introduced in later years.

Introduction

The Build Back Better plan for health and social care that was announced on 7 September 2021 provided the NHS with a significant funding increase and much needed certainty for parts of its budget over the next three years. The plan also took some long-awaited first steps on social care reform in England.

New funding announced for the next three years totals £30.3 billion across health and social care in England. Of this, £5.4 billion is earmarked for social care reform and the remainder will be split between NHS England and Department for Health and Social Care budgets. The new funding will come from new tax receipts in the form of the Health and Social Care Levy, a 1.25 percentage point increase on National Insurance Contributions.

This new funding is very welcome but, given the context of growing backlogs across the NHS, social care and public health, as well as chronic workforce shortages, it is important to be realistic about what it can deliver. In the lead up to the Comprehensive Spending Review it is also still unclear how much funding from the levy will be allocated for some key areas of health and care expenditure, including budgets for NHS workforce development. Capital budgets to invest and renew NHS buildings and equipment have also not been set beyond 2021/22.

The Comprehensive Spending Review is the opportunity for government to provide certainty to these important areas of spending, to ensure the whole health and care system has the resource to deliver an equitable recovery from the pandemic and make progress against key manifesto commitments. And while certainty now will be helpful to system leaders planning and delivering services, given the uncertainty about both the future path of the pandemic, and the economic recovery, government needs to be open to increasing spending if circumstances require it.

In this briefing we look across different areas of health and care spending in turn, to describe the scale of the challenge in each and consider how to resolve them.

Tackling the health and care backlog

As of July 2021, the number of people waiting to start elective (planned) NHS treatment now stands at 5.6 million, an increase of approximately 30 per cent compared to March 2020. While the available data draws attention to the acute sector, people are also facing challenges accessing high-quality care in other areas including social care, mental health, general practice and community health care.

In short, growing waiting lists mean more people having to wait longer for the care they need. In some cases, this may mean living with discomfort and frustration, while for others it may mean an avoidable deterioration in their health and overall worse health outcomes.

Taken together, recent announcements on NHS funding have amounted to an additional £10 billion between 2021/22 and 2024/25 to support elective recovery across resource and capital budgets. There is an expectation, set by the government, that this new money will allow the NHS to deliver around 30 per cent more elective activity by 2024/25 than it was before the pandemic (adjusted for changes to how the NHS delivers services over future years).

The rationale for focusing on activity levels, as opposed to reducing the waiting list to a specific number or setting a waiting-time target, may be that the scale and type of demand that the NHS will face over the next three years is unclear. Estimates suggest that the waiting list could reach 13 million, but it is still difficult to predict how many patients will come forward for care, and over what period, after the disruptions caused by Covid-19 to elective services gradually ease.

There is also a significant inequalities element, with our analysis showing that people living in the most deprived parts of England are twice as likely to wait more than one year for treatment compared to those living in the least deprived areas. The NHS is committed to reducing the backlog in an inclusive way and has asked local areas to better understand waiting times by ethnicity and deprivation. To support this and reduce inequalities in access, targets will need to have appropriate flexibility to allow local systems to tailor their approach to the specific needs of their populations.

Supporting the health and care workforce

The pandemic has underlined how staff often work under enormous strain as a result of workforce shortages. The NHS Long Term Plan recognised the need to address this but was not supported by a detailed workforce plan. While an NHS People Plan was subsequently published, it did not come with the multi-year funding that would be needed to translate this plan into increased numbers of staff.

The government has set out ambitious manifesto commitments to increase numbers of nurses, as well as GPs and other primary care professionals. To make progress on these commitments and ensure that access to services recovers after the pandemic, the Comprehensive Spending Review should be used to clarify and allocate resources for training, development and other support needed to deliver a multi-year workforce plan.

Increasing recruitment will be an important part of this, and the government have taken important steps on re-introducing student maintenance grants and investing in training places. It is also vitally important to address chronic excessive workloads and improve retention of staff, especially with so many NHS staff suffering from burnout and significant numbers, particularly nurses, intending to leave.

Health Education England has been asked to review long-term trends for the health and care workforce, to help ensure these sectors have the staff they need to deliver high quality services. This wider focus is welcome - any strategy for shoring up the NHS and social care workforce cannot be viewed in isolation from the need to invest in and support the wider health and care workforce, including voluntary and community sector organisations. Addressing shortages in the NHS must not come at the expense of other parts of the system.

NHS resource and capital budgets

NHS resource budget for day-to-day running costs

In the decade up to 2019/20, the health service faced the most prolonged spending squeeze in its history. The NHS continued efforts to improve its productivity by improving how services were organised and delivered. But rising demand for services and constrained funding still led to significant financial deficits in frontline NHS organisations and longer waits for patients over this period.

A new three-year funding deal for the NHS and the Department of Health and Social Care was announced in September 2021 (see Figures 1 and 2). This will see day-to-day spending for NHS England and the Department of Health and Social Care rise by 3.9 per cent a year on average in real terms between 2018/19 and 2024/25.

Even before the Covid-19 pandemic, the limitations of the previous five-year NHS funding deal, which was announced in July 2018, were becoming clear. The funding deal excluded important areas of day-to-day spending  – including budgets for the education and training of clinical staff. Continued uncertainty for these budgets contributed to the NHS being locked into a staffing crisis and spiralling waits for treatment. It is still unclear to what extent these areas of spending are included within the new September 2021 funding deal, or how previous funding boosts announced in the Spring Budget 2020 will be allocated over the rest of this parliament.

NHS capital budgets for equipment, building and maintenance

Between 2015/16 and 2019/20, funding for long-term capital investment in the NHS was reallocated to prioritise day-to-day running costs. Underinvesting in capital programmes has stored up problems for the future, and there is a significant opportunity cost from failing to invest in the transformational change needed to deliver new and more productive models of care. The total cost of tackling problems with deteriorating NHS buildings and equipment rose to £9 billion by 2019/20. Failing to give the NHS the investment it needs means staff and patients will increasingly be exposed to safety risks from unreliable equipment and deteriorating facilities.

Since 2019/20, capital budgets have started to increase again. A new Health Infrastructure Plan was published and the Prime Minister announced funding to support the ‘40 new hospitals’ building programme. But the government has only published multi-year plans for some elements of capital funding and has repeatedly promised – but failed to deliver – a multi-year capital investment budget for health services in England.

The continued strategic uncertainty in NHS capital funding has been described as akin to ‘driving in fog’ by a senior figure in the NHS and has a material impact on the ability of local NHS leaders to plan future improvements to patient services. For the government to be able to deliver on manifesto pledges to improve the NHS estate and build new hospitals it should set out a more coherent and sustainable capital investment strategy as part of the multi-year capital programme promised for the Autumn Budget.

Public health

Despite repeated promises to strengthen public health and prevention, government funding for local authority public health budgets has been substantially cut in recent years. While this trend has been halted since 2020, with the government maintaining the public health grant in real terms in 2020/21 and in 2021/22, the grant is still 24 per cent lower per head in real terms compared to 2015/16.

Restoring the core public health grant to 2015/16 levels would require an additional investment of £1 billion.

This shortfall in funding has led to reductions in vital services such as health visiting, stop-smoking support and sexual-health clinics, putting people at risk of poorer health and storing up problems for the future. This has been compounded by the pandemic, which disrupted delivery of services and has created a backlog of demand for public health services. As such, if the government wants to ensure adequate delivery of public health services and help improve population health, it will need to use the Comprehensive Spending Review to increase the public health grant.

Beyond health promotion and improving service delivery, local authority public health teams have faced unprecedented health protection challenges through the Covid-19 pandemic. Recognising these additional pressures on local authorities, government introduced the Contain Outbreak Management Fund, which has been allocated to local authorities on the basis of need and prevalence of Covid-19 infections. Taken cumulatively, the Contain Outbreak Management Fund money provided to local authorities has totalled £2 billion across 2020/21 and 2021/22.

As it stands, this funding is due to end in March 2022. This presents a cliff edge for local authorities which have used the funding to target support at worst affected groups, to invest in specialist support like behavioural-science expertise and to maintain contact-tracing services. Given that there will be a need to maintain these services in years to come, local authorities will need funding to do this.

Social care

Of the £30.3 billion set to be raised by the Health and Social Care Levy in England over the next three years, £5.4 billion (approximately 18 per cent) will go to social care. It has not been confirmed how this money will be split between the costs of funding reform and meeting the costs of wider reforms, or how it will be distributed over the next three years. The government will need to provide clarity on this so that local authorities have the certainty they need to plan and deliver services.

The new money also excludes other social care cost pressures that local authorities are facing, including the backlog of social care assessments. Currently, 54,000 people are waiting for assessments of their care needs, meaning more people are living with unmet care needs, which can have a significant detrimental impact on their health and wellbeing. Directors of adult social services report that they are worried about balancing budgets and meeting statutory duties this year, with only one in five reporting they are confident of doing so this year.

The Comprehensive Spending Review will have to consider how central government funding and grants (such as the Better Care Fund and the Infection Control Fund), can be used to deliver the necessary resource to help improve access, reduce the backlog and meet cost pressures associated with increases to the National Living Wage as well as ongoing demographic pressures. This will need to be considered in the broader context of the local government finance settlement, the overall level of which will determine the spending power of local authorities and therefore the money available to adult social care.

While the plans for reform are a real step forward in social care, it is not a permanent fix or job done. The funding announced so far is limited, it only covers reform costs, not the costs of maintaining the current system.

Conclusion

The Covid-19 pandemic rendered previous health and care spending plans obsolete, as the scale of the crisis demanded massive additional investment and affected delivery of vital services. While waiting times and waiting lists were growing before Covid-19, the pandemic has accelerated their growth and as such, the scale and profile of demand that the NHS, social care and public health will face in the coming years are difficult to quantify.

The new multi-year funding announcement for health and care from the Levy is welcome, but it is unclear if the funding will support vital areas of health and care spending such as workforce development budgets, which now must be a priority and a core part of the health system’s recovery from the pandemic.

Similarly, in social care, while the new funding is welcome and the commitment to reform long-awaited, it is not clear how it will deliver quality improvement or better access to services and does nothing to help local authorities meet the current costs of social care.

Meanwhile, public health has barely been mentioned in recent funding announcements. This is despite the fact that Covid-19 has highlighted glaring health inequalities and the public health system has a role in tackling them as part of the recovery from the pandemic.

Overall, while recent health and care funding increases have been significant and necessary, there are key areas of health and care spending where budgets have either not been set or remain uncertain. The Comprehensive Spending Review is the opportunity to address this.