Three priorities for the new government

Mounting deficits, worsening performance and declining staff morale mean the NHS is facing its biggest challenge for many years, while pressures on social care are escalating.

The challenge for the government will be to strike a balance between addressing unprecedented short-term pressures and initiating the long-term changes needed to place the NHS and social care on a sustainable footing. The stakes could not be higher.

1. New funding and higher productivity

The issue

Nearly two-thirds of acute hospitals are now in deficit, with NHS providers having overspent their budgets by more £800 million in 2014/15. The prospects for 2015/16 are even gloomier. With many hospitals having received emergency financial support or run down their reserves last year, a financial crisis is looming.

Looking further ahead, the NHS five year forward view argued that the NHS will need additional funding of £8 billion a year by 2020/21. This is the bare minimum needed to maintain standards of care – it will not pay for new initiatives, an increase in staff numbers or the upfront costs of service change.

This estimate also depends on delivering efficiency savings of £22 billion a year by 2020/21. While there is significant scope to improve productivity, delivering efficiencies on this scale is hugely ambitious and would require much higher productivity improvements than the NHS has historically been able to deliver.

Meanwhile, significant reductions in local authority funding have led to cuts in social care, reducing access to services and increasing pressure on the NHS. With estimates suggesting a potential funding gap of more than £4 billion by 2020/21, the pressures facing social care must be addressed urgently.

What must be done?

There is a real prospect of deficits snowballing and, unless additional funding is found, an accelerating decline in NHS performance and a deterioration in the quality of patient care as staff numbers are cut and waiting times rise.

• The first priority for the government must be to plug the growing black hole in NHS finances. Additional funding is needed this year to maintain standards of care and address the unprecedented pressures driving so many NHS organisations into deficit.

• Beyond 2015/16, the government must use this year’s Spending Review to put the NHS on a sustainable financial footing for the rest of the parliament. This means providing real-terms increases in the NHS budget each year, up to at least £8 billion a year by 2020/21. Additional funding must also be found for social care.

• This level of funding will not cover the costs of essential changes to services. The Spending Review should also establish a new health and social care transformation fund to support large-scale service changes and manage the transition between old and new models of care.

• Efforts to increase efficiency should be re-doubled. Better outcomes can be delivered at lower cost by reducing fragmentation of services, tackling variations in the way patients are treated and improving the co-ordination of care.

2. A new approach to NHS reform

The issue

Successive governments have relied on external pressures such as targets, inspection and competition to drive reform, with mixed results. In contrast, the experience of high-performing health systems in the United Kingdom and abroad shows the value of supporting organisations to transform care themselves by ensuring continuity of leadership, engaging staff and focusing on a clear commitment to put patients first.

In recent years, the NHS has been subjected to frequent top-down structural reorganisations. Instead of embarking on further organisational changes, the emphasis should be on how services need to change, taking the new models of care outlined in the NHS five year forward view as a starting point. This means providing more care outside hospitals and delivering integrated care to better meet the needs of the ageing population and the growing number of people with long-term conditions.

Success depends on enabling NHS leaders to develop cultures in which staff are motivated and supported to deliver high-quality, compassionate care. This means embedding a culture across the NHS in which openness, transparency and accountability are the norm. Patients should also be more closely involved in decisions about their care, with better use of data and technology to support them in managing their own health.

What must be done?

It is time to initiate a fundamental shift in how the NHS is reformed, learning from what has worked here and abroad.

• Another top-down reorganisation of NHS structures must be avoided. Instead of mandating change from above, the government should promote ‘reform from within’ by supporting NHS leaders to improve quality of care and lead change themselves.

• Ministers must resist the urge to micro-manage the NHS from the centre. A new political settlement should clearly define the strategic role of politicians and national bodies, and devolve more power and accountability to local NHS organisations.

• The NHS five year forward view offers a clear vision for how services need to change and commands widespread consensus. The government should build on this by ensuring that national policies support these new models of care and extend current initiatives led by the NHS and local government to accelerate the delivery of integrated care.

• There should be much greater emphasis on prevention, with local authorities using their responsibilities for public health to lead the way locally. Priorities include tackling obesity, reducing alcohol-related health problems and smoking, and increasing levels of physical activity.

3. A new settlement for health and social care

The issue

The 1948 settlement – which established the NHS as a universal service, free at the point of use, and social care as a separately funded, means-tested service – is no longer fit for purpose. With so many people living longer with a mixture of needs that cross the boundaries of health and social care, the historic divide between the two systems is not sustainable.

The independent Commission on the Future of Health and Social Care in England in England, chaired by economist Kate Barker, was established by The King’s Fund to consider the case for change and how to ensure adequate funding to meet future needs. Its final report set out a compelling vision for a new settlement that better meets 21st century needs.

The Barker Commission’s central recommendation was to simplify fragmented commissioning arrangements by moving to a single, ring-fenced budget for health and social care, and a single local commissioner of services. Entitlements to social care would be fairer, more consistent and generous, while entitlements to NHS services would remain unchanged. It suggested a radical package of measures to pay for this including tax reforms, limiting some universal benefits paid to older people and changes to prescription charges.

What must be done?

Responding to the challenge set out by the Barker Commission and delivering a new settlement for health and social care should be a top priority.

• As a first step, the government should move quickly to develop a framework to enable all local areas to move to a single commissioner of health and social care by the end of the parliament. The detailed arrangements for delivering this should be left to local areas to agree.

• More generous entitlements to social care should be phased in over time, as the Barker Commission recommended. This should be a key priority once the public finances are on a stable footing, with the aim of making some progress before the end of the parliament.

• In the long term, the government should aim to bring public spending on health and social care up to 11–12 per cent of GDP – the same proportion currently spent by countries such as France, Canada and the Netherlands on health alone.

• As the Barker Commission argued, the bulk of the additional funding needed to pay for a new settlement should come from the public purse. This raises difficult choices, so we urge the government to initiate a public debate about how to ensure adequate resources to meet future needs.