What’s the issue?
In recent years, spending on the NHS has been protected while other budgets, such as those for local government services and policing, have been subject to significant cuts. Despite this, health services are facing unprecedented financial and operational pressures, with many NHS organisations in deficit and key performance standards being missed.
What’s behind this?
Demand for health care is rising for several reasons: the population is increasing; more people are living longer, often with multiple long-term conditions; and technological advances mean that new treatments are available. As a result, health services are treating more people than ever before. For example, between 2003/4 and 2015/16, the number of admissions to hospital increased by 3.6 per cent a year.
At the same time, the service is enduring the most prolonged funding squeeze in its history. Under current spending plans, the NHS budget will increase by an average of 1.1 per cent a year between 2009/10 and 2020/21, compared to the long-term average of nearly 4 per cent a year since the NHS was established.
The mismatch between demand for services and funding is creating significant challenges. All areas of the NHS are affected, with acute hospitals, general practice, mental health and community services all under pressure. The Department of Health reported a revenue underspend of £563 million in 2016/17. Although this was a considerable improvement on the previous year, a significant underlying deficit remains.
At the same time, key performance targets are being missed all year round, with the four-hour standard for treating patients in A&E, the 62-day standard for beginning cancer treatment following an urgent referral and the referral-to-treatment target for elective care all missed in every month of 2016/17. Staff morale is also affected by growing workloads, staff shortages and public sector pay restraint. There is also evidence that access to some health services is being rationed and quality of care in some services is being diluted.
In the 2015 Spending Review, the government announced an increase in NHS England’s budget of £10 billion a year between 2014/15 and 2020/21, arguing that it had given the NHS the funding it asked for to implement the NHS five year forward view. The £10 billion includes new funding provided to the Department of Health but also included £2 billion of extra funding that had already been committed for 2015/16 and funds released through cuts in unprotected areas of the Department’s budget, including education and training, capital spending and investment in public health. Health spending – as defined by the Department of Health’s budget – will increase by around only £4.6 billion in real terms over this period.
On current plans, the NHS budget is due to increase by just 0.7 per cent a year between 2017/18 and 2020/21, resulting in a projected fall in NHS spending per person in real terms as population growth outstrips spending increases. The Conservative Party’s manifesto pledged to reverse this by increasing NHS England’s budget by £8 billion over the next five years, and to increase funding available for capital budgets. However, this falls a long way short of the Office for Budget Responsibility’s (OBR) estimates of the long-term funding required to keep pace with spending pressures. The amount the UK spends on health care as a proportion of GDP has fallen and we spend significantly less than countries such as France and Germany on this measure.
The King’s Fund view
There is still scope to improve productivity in the NHS. Emerging evidence from the Getting It Right First Time programme – which aims to improve quality of care and increase productivity in more than 30 clinical specialties – underlines the opportunities to reduce waste, improve clinical practice and tackle unwarranted variations in care. However, the NHS can no longer maintain quality of care and meet performance standards within its current budget. In the short term, the government will need to find additional funding if the NHS is to be able to deliver the current range of services to existing standards of care. In the long term, as the OBR has made clear, NHS spending will need to increase as a proportion of GDP. As the Barker Commission argued, this is affordable if hard choices are made about taxation and public spending.