Thinking the unthinkable about the NHSBMJ 2015; 351 doi: https://doi.org/10.1136/bmj.h5697 (Published 27 October 2015) Cite this as: BMJ 2015;351:h5697
Talk of financial crisis in the NHS is almost as old as the service itself. And in the 30 years I have been involved in health policy I have seen crises come and go. But the current financial pressures facing the NHS look to be on a different scale, deriving not only from the usual tension between funding and demand but also from the consequences of unprecedented fiscal austerity across the public sector.
The chancellor of the exchequer’s spending review on 25 November will have huge consequences for all public services. The fact that the government has ringfenced funding for the NHS and promised it an additional £8bn (€11bn; $12.3bn) might suggest that the health service has less to worry about than other departments, which are facing cuts of between 25% and 40%. But there are worrying signs ahead for the NHS.
Getting a commitment to additional funds was a major coup for NHS England’s chief executive, Simon Stevens. However, this amount was premised on the NHS making a very substantial improvement in efficiency and in controlling demand—equivalent to at least £22bn of additional work for the same money.
Restraining pay rises to 1% accounts for up to £5bn of the £22bn. But staff shortages in the NHS and wage inflation in other parts of the economy will make this very difficult. Managing demand, illness prevention, and moving care into other settings through new models of care and so on are expected to contribute a further £5bn or so. The evidence to support success in these areas is mixed.
Potentially serious delay
The remainder comes from raiding central budgets and some stringent efficiency improvements by providers. The peer Patrick Carter’s review of efficiency and procurement in the health service suggests ways in which up to £5bn of this could be achieved.1 But history is not encouraging when it comes to getting the NHS to be a smarter purchaser or to reduce clinical variation or adopt best practice. NHS England’s expectation was that the extra £8bn would be “frontloaded” to compensate for this and the lead time required to implement new care models. But because the Treasury saw this additional money being funded from economic growth and savings elsewhere there is some concern that it would prefer it to be delivered later in the spending review period. Such a delay would be potentially very serious for the NHS.
Even with large scale efficiency improvements and a funding increase, in 2020 the NHS will be spending roughly the same per person in real terms, after adjustment for changes in the age and size of the population. This leaves little headroom for the improvements that NHS England would like to see in care of people with learning disabilities, mental healthcare, and primary care. And this does not include funding for new hepatitis C drugs, other new treatments, the cancer strategy (£400m), seven day services (possibly over £1bn), and several other items on the shopping lists of ministers, pressure groups, and professionals. We have already seen the government begin to take the line that some of these items are included in the funding they have promised. This is, at the very least, open to debate.
The big question for the NHS in the long term is how realistic the assumptions about efficiency improvements are and whether it has the wherewithal to deliver them. The assumptions have been developed from the top down—but how they translate into local action is not clear. The limits to which national policy can make change happen are becoming ever more apparent. Success is going to be determined by the effectiveness of local implementation, and clinicians will be vitally important here.
The Treasury is putting much stock in the delegation of powers to local areas such as Manchester and Cornwall. While this is likely to be more effective than the usual exercise of national grip on the finances, the question—as with NHS England’s work on new models of care—is about the realism of the ambition and the amount of time available to achieve it.
Cuts to social care and public health
Problems face the health service in the shorter term too. Though the NHS is protected, local government is not, so further cuts to social care are very likely. This will have an inevitable impact in terms of increased admissions and delayed discharges, while cuts in benefits to some vulnerable groups may further increase pressure on the NHS—particularly general practice.
Public health now sits in local government and is therefore outside the NHS ring fence. A cut of £200m has already been announced, and further reductions are likely. This highlights an important point: it is the NHS that is ringfenced, not the Department of Health. Public health, education, training, research and development, and some capital spending are all in the unprotected part of the budget.
A substantial amount of the money in these areas finds its way back into frontline NHS services in general practice, screening, supporting trials, funding posts, and supporting education. A large part of the junior doctor workforce is paid for through this route. It is not clear how vulnerable these lines of funding are: although the Treasury has said that it has “no plans” to depart from real terms increases for the Department of Health, it is perfectly possible to achieve these increases while still subjecting services outside NHS England’s budget to deep cuts, something that would be detrimental to the sustainability of the service.
In the immediate future the provider side of the NHS is in deep trouble financially and performance is slipping. There does not seem to be a very clear plan for how to deal with this. Predicting financial crises in the NHS is a risky business. But the situation is looking very worrying.
It should not be assumed that the government will bail out the NHS. Some people in positions of influence might find that a crisis provides opportunities to develop various policies that had previously been off limits politically, ranging from charges, service restrictions, and much more wide scale use of the private sector. Thinking the unthinkable may become an attractive option for policy makers who believe that all other avenues have been exhausted.
When 25 November comes around one thing will be clear: the NHS is not immune from the effects of continuing austerity.
Cite this as: BMJ 2015;351:h5697
Competing interests: None declared.
Provenance and peer review: Commissioned; not externally peer reviewed.