Comprehensive spending review and the NHSBMJ 2015; 351 doi: https://doi.org/10.1136/bmj.h6477 (Published 01 December 2015) Cite this as: BMJ 2015;351:h6477
- Kieran Walshe, professor of health policy and management1,
- Judith Smith, professor of health policy and management2
- 1Alliance Manchester Business School, University of Manchester, Manchester M15 6PB, UK
- 2Health Services Management Centre, University of Birmingham, Birmingham, UK
- Correspondence to: K Walshe
Over the past few months an NHS financial crisis of unprecedented scale has emerged. After near zero real terms growth in healthcare funding from 2010 to 20141 most NHS trusts are now in deficit. Their accumulated shortfall half way through the year was already £1.6bn (€2.3bn; $2.4bn).2 Numerous commentators have called for urgent additional financial support and a longer term approach to tackling the causes of the NHS financial crisis3 4 5 6—a gap between funding and spending resulting from increasing service demand, a growing and ageing population, an expanded workforce to assure quality of care, deep cuts in social care, and various unfunded government commitments to new or extended services.
Much was expected of last week’s comprehensive spending review, but it turned out to be an exercise in smoke and mirrors.7 It delivered a modestly front loaded £8bn a year of extra funding for the NHS by 2020 but took almost half that money from other Department of Health budgets.8 These included capital spending, public health, health education and training, and various national agencies—a cut of over 20% in those areas in real terms.9 The current financial crisis may be postponed for a year or even two by these measures, but it has not been averted.
The future funding trajectory for the NHS looks grim. Overall, healthcare spending will grow by less than 1% a year in real terms over the next five years.10 Because that is less than the rate of economic growth predicted by the Office for Budget Responsibility, the share of gross domestic product (GDP) spent on public healthcare will fall between 2015 and 2020,11 probably to well below the current EU-15 average of 9.9% of GDP.12
This is no accident. The government has committed to reduce government spending as a share of GDP, from 45% when it entered office in 2010 to 36% by 2020.13 This involves a radical reshaping of the public realm. Although healthcare spending has enjoyed some protection, this has taken no account of the effects of big cuts in social care or the inexorable demographic and other pressures. By 2020, the NHS might simply not be financially sustainable in its current form.
So what should the NHS do now? The savings required by this spending review cannot be found through improved efficiency and productivity, and therefore a fundamental reassessment of what the NHS can provide within the proposed financial settlement is needed. The mechanism for doing this lies in the annual mandate for the NHS, issued by the secretary of state and laid before parliament. The mandate for 2015-16 was published in late 2014 and promised a host of service improvements that now look largely unaffordable and undeliverable.14 The government has recently consulted on how it should set the mandate up to 2020 in the light of the spending review.15 But the Health and Social Care Act 2012 provides that when the government changes the NHS financial allocation, the secretary of state must revise the mandate accordingly, seeking the agreement of NHS England.16
The mandate should therefore be renegotiated—and NHS England should publish a clear statement of the financial implications of every commitment. If the revised mandate is not affordable, we would argue that the board of NHS England has a fiduciary duty to make that clear to parliament.
The Department of Health and NHS England have two current policy initiatives that could deliver substantial savings—the “vanguard” care models programme17 and the health and social care devolution programme being pursued most radically in greater Manchester.18 It is not realistic to expect these initiatives to deliver savings at the scale and pace required within the new NHS funding settlement unless government allows unpalatable service reconfigurations and introduces new curbs on service demand, both of which would be politically contentious.
Other contentious changes may have to be considered. For example, the National Institute for Health and Care Excellence (NICE) could consult on reducing the economic threshold for NHS treatments (currently £20 000-30 000 per quality adjusted life year).19 Substantial savings could also be made through major reforms to the workforce.20
It is for the democratically elected government to decide how health services will be funded and to set the resources available. Equally, it is for NHS England to explain clearly to government and the public the consequences of those funding decisions and their effects on patient care.
Cite this as: BMJ 2015;351:h6477
Competing interests: We have read and understood BMJ policy on declaration of interests and declare the following interests: we have hold grants for research from the Department of Health and the National Institute for Health Research, and we are both non-executive directors of NHS foundation trusts.
Provenance and peer review: Commissioned; not externally peer reviewed.