Andrew Laird is a founder and Director of Mutual Ventures.
NHS finances are a difficult subject to raise – particularly as we are into the frosty winter months and the NHS will be under the usual seasonal pressure. Many council services, including adult social care services, will also be under severe pressure.
However, unlike the NHS, councils are legally bound to run a balanced budget i.e. spending has to match income, whether through central government funding or local taxes/charges. There is no such requirement within the NHS and as a result many trusts are in financial crisis and have needed bailing out by the Department of Health. The numbers are eye-watering and the situation is getting worse. According to the Health Service Journal, bailouts have reached almost £2 billion this year – up from £1.2 billion last year.
These starkly different approaches to funding have been accentuated by the process local areas have been going through to develop Sustainability and Transformation Plans (STPs). These plans form the cornerstone of the latest attempt to organise health and social care services in England.
An original aim of these plans was to drive the integration of NHS and council social care services. But you may have noticed some loud complaining from councils that they haven’t really been involved. The focus has largely been on fixing the short-term budget problems of individual hospitals. It’s easy to point the finger of blame at the NHS organisations – but they operate within a regulatory and financial environment which encourages a “fortress mentality” rather than an open and collaborative approach.
Lord Kerslake, a former Whitehall Permanent Secretary, has written a piece for The King’s Fund which shines an uncomfortable light on this rather huge elephant in the room. Put simply, he wants NHS organisations to be forced to run balanced budgets. This “would encourage earlier budget setting and longer-term planning” and force an acceptance that some very hard choices need to be made. Of course something has to give and in councils where a balanced budget is required, you are more likely to see service failure rather than in the NHS. Kerslake doesn’t mince his words in stating clearly what balancing the books could mean for the NHS:
“Requiring NHS organisations to balance their books without addressing the core funding issues of the NHS risks waiting times getting longer, staffing levels being cut, or particular services that are currently available being explicitly rationed.”
But yet it is still right to raise this issue. Kerslake now wants an open and honest conversation with the public about the type of health and social care service they are willing to pay for. This is a timely (and brave) suggestion – but not one without obvious political challenges.
So how have council services managed? They have been forced to behave much more like businesses with a range of levers like increasing council tax, including the ability now to raise additional funding specifically for social care. They are also able to hold reserves and borrow to invest. Many council services, such as school support, now charge for provision above and beyond what the council can afford to offer for free. The NHS does not have this level of flexibility.
The pressure to balance the books is forcing councils to think even more radically than this. Having squeezed as much out of their traditional in-house delivery models, they are increasingly looking at “spinning out” services into local authority trading companies (which are owned by the council but can act like businesses), staff-led mutuals and various forms of joint venture (including with the private and third sector).
This type of radical thinking is much harder to find in the NHS. To be fair, why would any service operating under the protective financial conditions of the NHS want to remove itself from that?
However, it can be done. There are a small number of trailblazer organisations out there which have spun out of the NHS and are now operating independently. Organisations like Navigo in Grimsby, delivering mental health services, and Provide in Essex, delivering community health and social care, are showing it can be done. They are not just acting like business – they are businesses – they are in the black and they are delivering award-winning services.
The unavoidable fact is that there is not enough money for the NHS to continue doing what it does the way it does it. The NHS desperately needs a regulatory environment which will force it to think more entrepreneurially and collaboratively. If NHS providers were forced to run balanced budgets, as Kerslake suggests, I think we’d see much more collaborative working between NHS providers, council services and the independent sector. This could only be good news for service users and the taxpayer.