The impact of the spending review on health and social care

The coalition government has finally wielded its long threatened axe with results that do not bode well for the NHS and social care.1 Spending on the NHS is to be slashed from an annual increase of 6% to 0.4% over the next four years, starting in April. Excluding the £15bn (€16.8bn; $23.6bn) to £20bn savings target, and with the promised modest increase amounting in practice to a cut in purchasing power once pay and other increases have been factored in, the key question is now whether what was announced by the chancellor will actually be implemented. By cutting public spending so far and so fast, the entire economic recovery may be at risk⇓.2

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If a week is a long time in politics then four years is an eternity, and a great deal may (and can) yet happen to modify, or even derail, the government’s various plans for spending cuts and restructuring. At the same time, strategic health authorities, primary care trusts, and local authorities are rushing to make deep cuts, often ahead of the need to do so, which means that many of the half million public sector jobs that are to disappear will have done so over the coming months, with results that are yet to be felt across the NHS and the wider economy.

The 0.4% annual increase in NHS spending is the lowest since the 1950s, when both the NHS and the health needs of the population were very different. Back then, it was widely believed that once the backlog of ill health had been cleared, pressure on the NHS would ease and its cost would be self liquidating.3 We know better now. Even so, in important respects the population was healthier after the second world war, with full employment a feature and considerably narrower income differences in evidence.

The NHS operates in a far more complex and interdependent world than it did when it was founded in 1948. Spending cuts affecting welfare, incapacity benefit, working tax credits, childcare funding, housing, and other areas will have a serious negative impact on the NHS and result in growing pressures on services as the fallout from the cuts is felt and the unemployed grow in number.

Current pressures on the NHS are largely a consequence of lifestyle related illnesses that are preventable. Dealing with these at source demands action far beyond the NHS, although it has an important part to play. But it is the NHS that will suffer the consequences of rising demand because of the failure to tackle the root causes of obesity, alcohol misuse, and mental ill health. That is why ring fencing the NHS budget never made sense.4 The commitment to place-based budgeting announced in the spending review for families with complex needs is an encouraging initial sign that the government understands the cross cutting nature of health problems, although ring fencing the public health budget is at odds with such an approach.

Cuts totalling 28% over four years in local government spending will add to the pressures on the NHS. Only social care is singled out for special protection, but the funding set aside (£2bn in total, with £1bn coming from NHS funds) is not ring fenced and may be insufficient to meet the funding gap identified by the Local Government Association.5

The Institute for Fiscal Studies has concluded that the spending review’s impact is regressive because some of the biggest losses will be felt by those who benefit most from the public services that are being cut.6 The heaviest users of such services are the poor, and without new jobs in the private sector to absorb the newly unemployed the ranks of the poor will inevitably grow. It is also likely that the “hidden economy” in cigarette and alcohol smuggling will grow, with negative consequences for public health.

Taking the cuts to public spending as a whole, it is hard to fathom how the NHS can escape having to bear the brunt of what will become an unhealthier community as the health gap between rich and poor widens. Maintaining social welfare programmes seems to be a key determinant of future population health.7 Unequal societies are almost always unhealthy societies, and—because health and wealth go together—growing income inequality will have a negative effect on health.8 9 The Marmot review on health inequalities, conducted for the last government, concluded that “austerity need not lead to retrenchment in the welfare state. Indeed the opposite may be necessary.”10 Its plea has gone unheeded in the spending review.

Not only will pressure on the NHS intensify as a result of the fallout from the spending review but the NHS will find it increasingly difficult to cope as it enters a period of major restructuring that threatens its very stability and long term future.11 Even if there was widespread acceptance of the changes, which isn’t the case, the changes affect every part of the NHS and will distract attention from more pressing matters, as the workforce gears up for the most disruptive upheaval since 1974. In this situation, the attention needed to achieve higher productivity gains through imaginative system redesign is unlikely to be present.12 Indeed, the reorganisation will require additional resources estimated at around £3bn to succeed.13

The effects of the spending review on health, especially in the poorest and most vulnerable groups, combined with an ill conceived “redisorganisation” surely amounts to a perfect storm. We must wait and see if the NHS can weather the gathering storm or if events, as yet unforeseen, will intervene to redirect its path.