A funding boost for the NHS in England

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Prime Minister Theresa May has delivered an early 70th birthday present for the NHS in the form of a commitment to provide annual funding increases averaging 3.4% in real terms over the next five years. These increases are less than the 4% that the King’s Fund and other organisations argued were necessary to sustain and improve the NHS but are considerably more than the increases governments have made available since 2010.

Prime Minister Theresa May has delivered an early 70th birthday present for the NHS in the form of a commitment to provide annual funding increases averaging 3.4% in real terms over the next five years. These increases are less than the 4% that the King’s Fund and other organisations argued were necessary to sustain and improve the NHS but are considerably more than the increases governments have made available since 2010.1

How generous the government has been depends on your point of view. Many in the NHS will have hoped for bigger increases in view of the scale of the operational and financial pressures they are experiencing. From the perspective of other public services like schools and police, the NHS has received special treatment in having its needs considered ahead of the government’s spending review and in bucking the trend of public spending constraints.

The willingness of a Conservative government to raise public spending and to find the resources the NHS needs by increasing taxes is a notable political event. After a decade of austerity in which public spending has been cut and most taxes held down to deal with the consequences of the 2008 financial crisis, the tide may have turned. Attention will now turn to how the government will find the money that has been promised and what the NHS will be expected to deliver in return.

Reports indicate that the government is looking at several options for raising more revenue from taxes.2 These include freezing personal tax allowances and increasing corporation taxes. Increases to national insurance contributions could also be used, following the example of the Labour government, which in 2002 raised resources in this way to help pay for investment in the NHS. In her speech at the Royal Free Hospital on 18 June, May said that taxes would be raised in a “fair and balanced” way and has asked the chancellor to come up with proposals.3

May has claimed that some of the extra funding will come from the savings made when the United Kingdom leaves the European Union. This claim has been questioned by economists and described by Sarah Wollaston, chair of the House of Commons Health and Social Care Committee, as “tosh.”45 The resulting row has distracted attention from what should have been a good news story for the government.

The NHS will now work on a plan for spending the money. May has already identified prevention, mental health, the workforce, harnessing the power of innovation, and putting patients at the heart of care as her priorities. The plan will also commit to getting back on track delivering the access standards in the NHS constitution, eliminating provider deficits, and making further progress in integrating care.

The plan will cover a 10 year period even though the funding increases are for only the next five years. The temptation will be to set bold goals for the end of the decade while being more realistic about what can be achieved in the shorter term. May has announced a clinically led review of waiting time standards, holding out the prospect that some may be revised downwards given recent difficulties with delivery.

Questions remain about future funding for public health and education and training, which were cut in the last spending review to help pay for increases in the NHS budget. Decisions will not be made until the autumn. Even more important will be what happens to social care funding: failure to find extra resources will result in even harsher rationing of care paid for by local authorities. The green paper on social care, also expected in autumn, provides an opportunity to explore more radical options for funding care on a sustainable basis.

The comprehensive recommendations in the final report of the Barker Commission would be a good starting point.6 In 2014 the commission proposed a single health and social care system making use of a ring fenced budget and with entitlements to social care progressively aligned with entitlements to healthcare. A move to free personal care in England, to align with Scotland, would be step in the right direction and would cost an estimated £7bn (€8bn; $9bn) by 2020-21.7

The Barker Commission proposed that a new settlement should be funded by diverting resources from existing areas of public expenditure such as winter fuel payments and possibly attendance allowance; reducing the number of people exempt from prescription charges; ending the complete exemption from national insurance for those who work past state pension age; and increasing national insurance contributions by 1% for those aged between 40 and 65, who would be the main beneficiaries of more generously funded care in the first instance. The commission also recommended exploring the use of wealth taxes to raise some of the resources needed.

In her speech, May signalled her wish to move away from the internal market and free up the time and expense entailed in contract negotiations between commissioners and providers. The door is therefore open to changes in the law that will support moves towards integrated care across England based on collaboration and not competition. In the space of a week, the tectonic plates of the NHS have shifted decisively not only on funding but also on the means the government will use to improve care.

  • 1. Ham C, Edwards N, Dixon J. An open letter: a long-term funding settlement for the NHS. King’s Fund, Nuffield Trust, Health Foundation, 2018. https://www.kingsfund.org.uk/publications/pm-letter-funding-settlement-nhs
  • 2. Elliott F. Philip Hammond to raise billions in extra tax for the NHS. Times 2018 June 12. https://www.thetimes.co.uk/article/philip-hammond-to-raise-billions-in-extra-tax-for-thenhs-ttv80mzzj
  • 3. May T. Prime Minister’s speech on the NHS: 18 June 2018. https://www.gov.uk/government/speeches/pm-speech-on-the-nhs-18-june-2018
  • 4. Emmerson C, Pope J. The NHS’s “70th birthday present” and the public finances. Institute for Fiscal Studies, 2018. https://www.ifs.org.uk/publications/13078
  • 5. Walker P. May’s NHS “Brexit dividend” claim draws scepticism and doubt. Guardian 2018 June 17. https://www.theguardian.com/society/2018/jun/17/theresa-may-nhs-funding-budget-rise-brexit
  • 6. Commission on the Future of Health and Social Care in England. A new settlement for health and social care: final report. King’s Fund, 2014. https://www.kingsfund.org.uk/publications/new-settlement-health-and-social-care
  • 7. Bottery S, Varrow M, Thorlby R, Wellings D. A fork in the road: Next steps for social care funding reform. King’s Fund, Health Foundation, 2018. https://www.kingsfund.org.uk/sites/default/files/2018-05/A-fork-in-the-road-next-steps-for-social-care-funding-reform-May-2018.pdf

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