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Thomas Cawston is Head of Health at Policy Exchange.

Last week, the Deputy Prime Minister made an announcement with profound implications for the public finances. Speaking at his monthly press conference, he let slip that he expects the Chancellor to announce an extra £1.5 billion for the NHS. The figure has now risen to £2 billion. This would not be a one-off pre-election giveaway, but signal a “step change” in health funding that will continue into the next Parliament. This comes off the back of a recent report by NHS England identifying the need for real terms funding increases for the health service reaching £8 billion more above inflation by 2020.

Nick Clegg’s statement will remind some of the now infamous episode during the last Government when Tony Blair declared his intention to raise health spending to European levels on Sunday morning TV. On that occasion the Chancellor was reported to roar at the PM “You stole my f***ing budget”. The Deputy Prime Minister’s latest intervention no doubt seeks to ensure that his Party gets some of the credit for the cash injection into the failing health service. Although how both this one-off bung and the “step change” will be financed remains unclear. Certainly, if the Chancellor is to stick to his target to deliver a surplus in 2018/19, he will need to cut even more deeply across other services or ask the public to dig deeper into their pockets. For the time being, it would appear that extra spending, and not tax cuts or economic recovery, polled better in the Government’s focus groups.

Putting aside questions of how the money will be raised, important as they are, there is now the question of where the Deputy Prime Minister thinks the money should be spent. His statement, as well as a similar statement from Norman Lamb, appeared to hint that the money was needed to pull the NHS through this and the next “winter crisis”. But does this mean spreading the money evenly or targeting it on different services? More than one branch of the health service will feel they are most deserving of this bailout.

With the country’s A&E departments at the forefront of the winter crisis they may feel they should be first in line. In recent years A&E departments have been feeling the pinch more acutely than most because of a so called marginal tariff by which they only get paid 30 per cent the standard price when the number of admissions exceed the level of 2009. Certainly, recent headlines make grim reading with more patients waiting longer to be seen. Hospitals are now regularly declaring “black alert” – i.e. they’re full to bursting.

While A&E is the flashpoint, hospitals more generally feel in need of a bailout. Now 8 out of 10 acute foundation trusts are in deficit, a full £396 million in the red. Extra spending on nurses following the Francis Inquiry has been at least partly responsible for hospitals losing control of their finances. With being in deficit now the norm it is just a matter of time until some organisations struggle to pay their bills.

One group that will soon be queuing up outside the Treasury with their begging bowl will be the GPs. The Royal College of GPs has been campaigning all summer for more funding. As they have pointed out, general practice has faced real terms cuts for the last four years. At the same time, the number of patients calling on their GP has risen by 13 per cent. Throw in a future workforce crisis and it would appear Primary Care is on the brink.

An area that may expect to do well out of the pre-election giveaway is mental health. Nick Clegg has already signalled this is his number one priority. Recent reports have documented how this Cinderella service is being stretched after years of under-investment. There is now growing evidence that better mental health services delivers savings across the public sector and economy. After calling for a parity of esteem between physical and mental health, many in the sector will expect the Deputy Prime Minister to match his rhetoric with hard bucks.

While technically outside the NHS, social care may still feel that it should get a good chunk of the pie. Social care was outside the Governments ring fence and consequently face the full edge of the Chancellor’s axe. Spending has been cut by £3.5 billion since the election and many local authorities have had to restrict eligibility. There is already form for transferring NHS funds to support social care, and that could well be tempting option.

Of course, there is a good case for holding onto the money centrally for the time being. Whether to top up the slush fund to plug funding gaps as they appear, or to fund transformation projects as the NHS attempts to create a new model of care.

Deciding how to spend the extra cash will be the subject of much debate within and outside the health service. While doctors and hospital managers lobby and wait to get their fair slice of the cake, the real challenge will be keeping minds fixed on the need to achieve savings. Even with a bailout the equivalent to one-sixth of the entire police budget, the NHS still faces a huge funding gap that can only be met by efficiency and reform. Successive reports have identified swathes of waste in the NHS, and demonstrated that books have only been balanced to date by pay and price restraint. The NHS has barely begun its journey towards a modernised health system fit for today’s healthcare needs. If the chancellor does come to the rescue of the NHS on Wednesday, it cannot divert attention from the only thing that can save it.

16 comments for: Thomas Cawston: More money for the NHS. Where will it come from? And where will it go?

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