NHS finances and performance
Rising demand for health care means that the NHS is treating more patients than ever before. 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 health service is enduring a prolonged slowdown in funding. 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 a long-term average increase of nearly 4 per cent a year since the NHS was established.
The mismatch between demand and funding means that NHS services are struggling to maintain standards of care. All areas of care are affected, with acute hospitals, general practice, mental health and community services all under strain. It is important to keep this in perspective – public satisfaction with services remains high and the NHS is still the best-performing health system among 11 countries analysed by the Commonwealth Fund. However, there is no doubt that the service is facing unprecedented financial and operational challenges.
The Department of Health reported a revenue underspend of £563 million in 2016/17, a significant improvement on the previous year when it exceeded its departmental expenditure limit. However, this included a deficit of £935 million (including accounting adjustments) among NHS providers. Although this was a considerable improvement, a significant underlying deficit remains. The provider sector is already forecasting a deficit of nearly £500 million in 2017/18 and there is evidence that commissioners are under growing financial pressure. With the NHS budget due to increase by an average of just 0.7 per cent a year in real terms between 2017/18 and 2020/21, the service will continue to face significant funding pressures for some years to come.
NHS England and NHS Improvement have recently introduced a new capped expenditure process in a number of areas that are at risk of overspending their budgets in 2017/18. NHS leaders in these areas have been asked to consider radical measures to cut costs, including stopping funding for some treatments, closing wards and operating theatres, and reducing staffing. While the details of the final proposals from the areas affected are unclear, the potential implications for patient care could be significant.
While performance held up well in the early years of the decade, it has now deteriorated with key targets being missed all year round. For example, the four-hour standard for treating patients in A&E has not been met since July 2015, the 62-day standard for beginning treatment for cancer following an urgent referral has not been met for more than three years, while the 18-week referral-to-treatment target for elective care has not been met for more than a year and has effectively been downgraded. The Commonwealth Fund’s report showed that the NHS continues to lag behind other countries on key health outcomes such as infant mortality and survival rates for cancer, heart attacks and strokes, although the gap is closing.
New data highlighting an increase in the number of vacant NHS posts in the first quarter of 2017 underlines the pressure on the NHS workforce as a result of growing workloads and staff shortages. This is affecting staff morale – one of the top two concerns reported by NHS finance directors in each of our last four quarterly monitoring reports – and is fuelling calls to increase staff pay. Brexit is exacerbating these pressures: while other factors are also having an impact, the number of EU nationals registering as nurses has fallen by 96 per cent since the EU referendum. While the Secretary of State for Health’s assurances that securing the rights of the 60,000 EU nationals working in the NHS will be a top priority during the Brexit negotiations is welcome, there is an urgent need for a new NHS workforce strategy.
The NHS has delivered productivity gains of 1.2 per cent a year since 1979 , outstripping the gains made in the rest of the economy over the past decade. Although many of the easier options for cost savings have been exhausted and the NHS is struggling to deliver further efficiencies at the scale and pace needed, there is still much that can be done to deliver better value from the NHS budget. Emerging evidence from the Getting It Right First Time (GIRFT) programme – which aims to improve quality of care and increase productivity in more than 30 clinical specialties – underlines that there are significant opportunities to reduce waste, improve clinical practice and tackle unwarranted variations in the delivery of care.
Despite this, it is unrealistic to expect the NHS to continue to meet rising demand and maintain standards of care within current funding constraints. The Conservative Party’s manifesto pledge to increase NHS England’s budget by £8 billion over the next five years is welcome. However, it falls a long way short of the Office for Budget Responsibility’s estimates of the long-term funding required to keep pace with spending pressures. While NHS funding has been protected compared to other budgets, 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.
Capital budgets have been cut in recent years to fund revenue spending, reducing investment in buildings and equipment. We therefore welcome the additional £325 million in capital funding for sustainability and transformation plans announced in the Spring Budget, with a promise of more to come in the Autumn Budget, and the Prime Minister’s commitment to implement the Naylor review of NHS property and estates by increasing capital spending by £10 billion over the parliament. Some of this will come from NHS land sales rather than new funding, and there are many challenges to overcome before the money can be released. Nevertheless, it represents a significant opportunity to deliver much-needed investment.
There is also evidence that access to some treatments is being restricted and quality of care in some services is being diluted. Our research found that although it has taken time for financial pressures to have an impact on frontline services, patient care is now being affected, with public health and community services hardest hit. Our June 2017 quarterly monitoring report found that half of clinical commissioning groups (CCGs) were planning to delay or cancel spending this year, for example, by reducing the amount of planned treatment they commission, while NHS England has recently announced a consultation on proposals to reduce the prescribing of medicines and treatments of low clinical value. This underlines the need for a debate about the services that the NHS can provide with the funding it has been given.
The ageing population, changing patterns of disease – with more people living with multiple long-term conditions – and rising public expectations mean that fundamental changes are needed to the way services are delivered. The key is to organise care around the needs of the patient by integrating primary and secondary care, physical and mental health services, and health and social care. This requires NHS organisations to work together and with local partners to design new service models, give much greater priority to prevention and deliver care closer to people’s homes, in line with the vision set out in the NHS five year forward view.
This vision is being taken forward locally in 50 ‘vanguard’ areas – many of which appear to be making good progress in developing new ways of delivering care – and through sustainability and transformation plans (STPs). In the most advanced areas, accountable care systems are emerging that bring together a range of services to deliver integrated care for their local populations. These developments mark a decisive shift away from the focus on competition as a driver of service improvement, towards collaboration between NHS organisations and their partners in place-based systems of care.
STPs had a difficult beginning, attracting criticism for failing to involve patients, the public and staff in their development, not engaging sufficiently with local authorities and proposing controversial changes to hospital services. Despite this, STPs represent the best hope for the NHS and its partners to address the challenges they are facing. The priorities now are to turn STPs from ambitious proposals into credible plans, achieve much greater local engagement and strengthen leadership and governance.
Many STPs include proposals to change the role of hospitals and specialist services. Evidence suggests that reconfiguring hospital services rarely saves money and often fails to improve quality of care. However, for some specialist services – such as stroke, trauma and vascular surgery – concentrating care in fewer hospitals can produce better clinical outcomes. Where the clinical case has been made that changes will improve quality of care and deliver benefits to patients, politicians should back them even if they encounter local opposition.
STPs are a workaround of the complex and fragmented arrangements resulting from the Health and Social Care Act 2012 and have no basis in law. The Conservative manifesto committed to legislate, if necessary, to overcome barriers to implementing the NHS five year forward view and to clarify accountability. The Secretary of State has since said that any legislation is off the agenda for at least two years. As national NHS leaders have pointed out, significant progress can be made in delivering the changes needed without amending legislation. However, while another top-down reorganisation should be avoided, the law will need to be revisited to update a legal framework that was designed to promote competition and is increasingly out of step with a vision of the future based on collaboration between NHS organisations.
Responding to these challenges will require exceptional leadership at a time when a number of the most experienced leaders are leaving the NHS and there is evidence that it is becoming more difficult to fill leadership vacancies. As the national bodies have recognised, much more needs to be done to support compassionate leadership and to tackle the bullying behaviours evident in some parts of the NHS. This means focusing on engaging staff, acting on patient feedback and implementing quality improvement techniques to develop cultures of care in which staff are supported and patients come first.
We welcome the cross-party consensus on delivering parity of esteem for mental health and the government’s commitment to reform mental health legislation and publish a Green Paper on children and young people’s mental health. This builds on the strategy for improving mental health services set out in The five year forward view for mental health and the government’s commitment to provide additional funding of £1 billion a year by 2020/21.
The first test of this commitment will be to ensure that funding reaches frontline services. Our analysis found that 40 per cent of mental health trusts in England reported a real-terms decrease in their operating income in 2015/16, despite NHS England setting clear expectations that mental health spending should increase at least at the same rate as CCGs’ overall budgets. There is also widespread evidence of poor-quality care, shortages of inpatient beds and workforce pressures. With research showing that addressing mental and physical health needs together is good for patients and saves money, areas must give equal focus to mental health when developing new models of care and in STPs.
Although public satisfaction with general practice remains high, evidence suggests that people are finding it more difficult to get appointments, while GPs report that they are under growing pressure. Our recent analysis highlighted a 15 per cent increase in the number of consultations between 2010/11 and 2014/15, while over the same period the proportion of NHS funding spent on general practice declined by 0.4 per cent. At the same time, the profession is facing a recruitment and retention crisis with fewer GPs choosing to undertake full-time clinical work, many opting to work in salaried or locum roles rather than as partners, and large numbers retiring. Despite the previous government’s pledge to increase the number of doctors in general practice by 5,000 by 2020/21, the number of full-time equivalent GPs fell by 0.3 per cent in 2016.
We welcome the publication of the General practice forward view which committed additional funding and outlined measures to help recruit and retain GPs. It is essential to invest more of the NHS budget in general practice. At the same time, practices must accelerate progress towards working at scale in federations and networks to provide a wider range of services to patients, make better use of technology and adopt new ways of working.
On current spending plans, local authority public health budgets will be cut by an average of 3.9 per cent a year up to 2020/21, resulting in a real-terms reduction in funding of at least £600 million, on top of a £200 million cut from the 2015/16 budget. As a result, on a like-for-like basis, councils are planning a reduction in spending of £85 million in 2017/18 compared to 2016/17 and implementing cuts to a wide range of services including smoking cessation, drug misuse and sexual health services. This is a false economy, putting people’s health at risk, storing up problems for the future and undermining STPs, many of which are predicated on assumptions that improving population health will reduce demand on the NHS.
The government should protect public health budgets and reverse current planned cuts. With evidence emerging that health inequalities are widening, a cross-government strategy that focuses on improving population health and reducing health inequalities is urgently needed. This means acting on the wider determinants of health including housing, employment, air quality, diet and nutrition, and on opportunities to take exercise and keep fit. It should draw on the approach taken in Wales where all relevant government policies are now subject to a health impact assessment. It should also include a tougher approach to regulation, and action on pricing and taxes to help tackle obesity and other public health challenges. The NHS also needs to do more to support this agenda by harnessing its economic power and influence as an employer to improve people’s health.
Rising demand for services due to an ageing population and years of underfunding have left adult social care services in crisis. An 8 per cent real-terms cut in spending by local authorities between 2009/10 and 2015/16 means that the number of older people accessing publicly funded services has fallen by more than 400,000. The introduction of the Council Tax precept and the £2 billion in additional funding over the next three years announced in the Spring Budget have provided some breathing space for overstretched local authorities. However, the sector still faces a funding gap of £2.1 billion by 2019/20.
As a result, many vulnerable people are being forced to rely on friends and family or are unable to access care at all. At the same time, the combined impact of reductions in fees paid by local authorities, staff shortages and the costs of paying those working in the sector the National Living Wage is forcing increasing numbers of care providers to leave the market. These problems are exacerbating pressures on the NHS, with the number of bed days lost due to delays in discharging patients from hospital attributable to social care having risen by nearly 50 per cent in the two years to the end of March 2017.
Although the Care Quality Commission’s recent report on the state of adult social care services found that the majority of services were providing good-quality care, more than one in five services were rated as inadequate or requiring improvement. There is also considerable variation in performance, for example, in implementing good practice to reduce delayed discharges from hospital. Like the NHS, social care faces significant workforce challenges, with longstanding problems concerning recruitment and retention of staff, low pay and a reliance on migrant workers, including 90,000 EU nationals.
The focus on social care in the Conservative Party’s manifesto was welcome, even if the proposals were poorly thought through. The belated pledge during the election campaign to introduce a cap on the lifetime costs of care – also a manifesto commitment in 2015 – offered the prospect of protection for people facing the catastrophic costs of long stays in residential care. However, there now appears to be significant doubt about whether these proposals will be taken forward. With the agreement between the Conservatives and the Democratic Unionist Party confirming that the manifesto commitments to end the triple lock on pensions and to means-test winter fuel payments – the proceeds of which had been earmarked to pay for health and social care – have been dropped, it will be even more difficult to find the money needed to pay for them.
The need for change in how social care is funded remains as vital and urgent as when the Prime Minister made the case for it during the election campaign. Having raised expectations by committing to act ‘where others have failed to lead’, it is essential that the government follows through on this in its forthcoming consultation paper. This should be substantial and wide-ranging, setting out costed options to put social care on a sustainable footing for the future and striking a fair balance between public and private funding. It must also address workforce challenges and improve service models. In doing so, it should draw on the work of the Barker Commission which proposed a new settlement for health and social care, including more generous entitlements to publicly funded social care. This is realistic and affordable if implemented over time, and hard choices are made about how to find the additional resources.
For two decades, politicians have recognised the need for fundamental reform of social care backed by a cross-party consensus. Yet despite numerous reviews, commissions, Green and White Papers, successive governments have ducked the challenge. It is essential that this government has the courage to succeed where its predecessors have failed by living up to its promise to tackle one of the burning injustices of our time.
Seven years of austerity have left health and social care services facing unprecedented challenges. In the NHS, this is manifesting itself in financial deficits, longer waiting times for treatment and moves to ration services. In social care, the system is failing older and disabled people, their families and carers. The public is increasingly aware of these pressures and the outcome of the general election signalled growing public dissatisfaction with austerity.
Yet, the election campaign saw little meaningful debate about the NHS. While social care was a key issue during the campaign, the result has been to set back progress towards fundamental reforms identified as urgent two decades ago. This followed an EU referendum campaign during which the key claim was that Brexit would result in a huge funding dividend for the NHS.
The public deserve better than this. Politicians must be honest about the reforms needed and the funding required to deliver services to the standard people expect. If the government does not believe this is economically or politically possible, it must be clear with the public about the consequences and the inevitable deterioration in services that will follow.
I hesitate to suggest any additions. However I think it is worth mentioning the need to capture the learning from the Vanguard schemes, all of which reach the end of their 3 year lifespan on 1/4/18. New care models which have been shown to be effective should be used as the foundation for widespread local care within STPs in my opinion.
Also, I believe there is a need for the NHS to recognise and engage with the voluntary sector to a larger extent. To do so can offer more and different help to the population than the NHS and Social Services are capable of.
The NHS and Social Care do excellent work generally but their inability to think as one and managers and leaders to manage and lead seems distant, and it should not be.
Making better use of what they have and cutting down on waste for instance seem dirty words in many areas . Indeed those responsible for managing this seem to be able to get away with it by doing little to the problem year after year.
Lets stop group hugs and being sorry for oneself and make really tough decisions. They may hurt and indeed squeak but patients deserve better.
I suspect it would show that underfunding in these areas (compared to our european neighbours) is even greater than it is in health.
It is no use expecting modest increases in social care budgets to ride to the rescue of the NHS.
And its no use blaming politicians if the Kings fund keep offering them lifelines viz "there is still much that can be done to deliver better value from the NHS budget" and "there are significant opportunities to reduce waste, improve clinical practice and tackle unwarranted variations in the delivery of care" and "STPs represent the best hope for the NHS and its partners to address the challenges they are facing".
In our study of STPs as published we found none yet capable of demonstrating they are capable of implementation with the evidence backing their wishful thinking on savings and demand reductions still lacking.
It's time for the KIngs Fund to come off the fence.
My recent blog shows declining public spending on long term care in the UK and rising spending in Europe. https://www.kingsfund.org.uk/blog/2017/08/political-consensus-needed-ensure-future-health-and-social-care
The Fund has challenged politicians of all parties to fund the NHS and social care on a sustainable basis and we will continue to make the case for a new health and social care settlement as advocated by the Barker Commission.
Thanks for your contribution