The gap between funds and delivery of services
Worries about the financial sustainability of the NHS have a long history. Almost as soon as it was set up, there were concerns about the cost of the NHS and whether this could be sustained. Now more than ever, there is growing anxiety that the NHS cannot deliver what is asked of it within the funding made available. In common with health systems internationally, the NHS faces serious challenges. In addition to population growth, population needs are changing with significantly as more people living longer, and many older patients having long-term or complex conditions that require more resources. Public expectations have grown, as have the range of health care interventions available. In addition, there have been changes in the recommended staffing levels, following the Francis Report in 2013 after the revelation of atrocious care at Mid Staffordshire Foundation Trust. However, the level of NHS funding has not kept pace with the increased demand: since 2010, the NHS budget has effectively been frozen, increasing by just enough to cover inflation.
The level of funding made available is largely a political decision but it’s not the only one influencing the financial sustainability of the NHS. For example, despite the evidence, the government has failed to regulate the sugar content in soft drinks, even though this has made a significant contribution to the obesity epidemic, estimated in 2007 to cost the NHS £4.2 billion a year (https://www.noo.org.uk/NOO_about_obesity/obesity_and_health).
In addition, decisions made some years ago to save money, such as
- reducing the number of training places for health care professionals, and
- a drop in pay of 15% in real terms since 2010
have led to shortfalls of qualified staff. For instance, in 2016 there were 23,443 nursing vacancies in England, Wales and Northern Ireland (9% of the workforce), with many trusts said to be running on nursing numbers that broke safe staffing guidelines (https://www.theguardian.com/society/2016/jun/25/the-other-nhs-crisis-the-overworked-nurses-who-are-leaving-in-despair). In response to the shortages, trusts have resorted to employing agency staff – at hugely inflated cost. They spent 7.6% of their total staff costs on agency and contract staff in 2015-16 (up from 4.8% in 2012-13). The Department of Health introduced controls on agency spending in October 2015, but the amount spent on agency and contract staff remains high: £3.7 billion in 2015-16, compared with £3.3 billion in 2014-15. Unfortunately, it’s unlikely that there will be a significant reduction in the use of agency staff in the near future as it may take years to resolve the issues that have undermined the successful recruitment and retention of permanent staff (https://www.nao.org.uk).
Cuts in social care funding and resulting pressures on social care services have also had a knock-on effect on the NHS. Since 2009/10, because of cuts in funding, local authority spending on social care for older people has fallen by 17% and in most local authorities only those with ‘substantial’ or ‘critical’ needs will get publicly funded social care (https://www.kingsfund.org.uk/projects/verdict/how-serious-are-pressures-social-care). This accounts, at least in part, for an increase in A & E attendance and emergency hospital admissions of more than 6% between April and June 2016, compared to the previous year. Without adequate resources to care for patients at home, the number of patients waiting for hospital discharge has become the highest ever.
Also, it’s difficult to calculate the costs from turning the NHS into a market (e.g. the extra costs of compulsory competition, such as legal advice, advertising etc ) as a result of the Health and Social Care Act (2012), but the most conservative estimate is £4.5 billion a year (http://chpi.org.uk/wp-content/uploads/2014/02/At-what-cost-paying-the-price-for-the-market-in-the-English-NHS-by-Calum-Paton.pdf). This is enough to pay for 174,798 extra nurses. The amount of the NHS budget spent on management and administration also rose from 5% to 14% each year after marketisation (http://www.theguardian.com/society/2010/mar/30/nhs-management-costs-spending).
On top of this, as a result of the government’s withdrawal of public funding for capital projects in the NHS, such as new hospital buildings or IT systems, some trusts have had to enter hugely expensive Private Finance Initiative (PFI) deals. With contracts as long as 40 to 60 years, together with high interest rates, trusts can in some cases be paying almost 12 times the initial sum borrowed, payments that come out of their operational budget for equipment, staffing and patient care. Increasingly, Trusts with PFI contracts are going into financial deficit.
By April 2016, NHS trusts reported the largest financial deficit ever – over £3.5 billion (once accounting adjustments are taken into consideration). And, while NHS costs rise by at least 4% a year, increases in NHS funding are dropping from 3.8% in 2016-17, to 1.4% next, and 0.3% in 2018-19.
As the Council Chair of the British Medical Association has said
How to close the gap?
Responses to the funding crisis have been piecemeal. For example, some CCGs have stopped all non-urgent care for a short period. Others have suspended non-urgent treatment for smokers and obese patients. A number of trusts have had to close some services on safety grounds while others have reduced their staffing levels.
More cuts are expected as trusts and commissioners are having to invest in ‘transformation’ programmes (see Sustainability and Transformation Plans), but without knowing what level of investment will be required, or whether they will be able to make the changes required at the scale and pace demanded. Applications to the Sustainability and Transformation Fund (a total of £1.8 billion in 2016/17) will only be successful if the STPs developed conform to the aspirations of NHS England’s Five Year Forward View, and meet strict criteria that push new local health systems (or ‘footprints’) to make cuts in services.
This is after a report from the National Audit Office (NAO) saying that the collective efforts of the Department of Health, NHS England and NHS Improvement to get NHS finances back on track – such as overly optimistic and unachievable savings and efficiency targets – have damaged trusts’ financial positions and contributed to a situation in which financial problems are endemic, with more than two thirds of trusts in deficit during 2015/16 (https://www.nao.org.uk).
In the face of all this, the Chief Exec of NHS Providers has called on the Health Secretary and the Chief Exec of NHS England to set new limits on what the NHS can provide – i.e either rationing of treatments, cuts in staff or longer waiting times – if the NHS budget is not increased.
There are strong arguments that it should be increased. In 2014 a report by the Commonwealth Fund, a Washington-based foundation that analyses the performance of different countries’ health systems, found that of 11 countries with similar economies, the UK ranked first overall, scoring highest on quality, access and efficiency. And yet at the same time, the researchers found that the UK also spent the second-lowest amount on healthcare among the 11 – just £2,008 per head, less than half the £5,017 spent in the US. Only New Zealand, with £1,876, spent less.
This is despite research showing that investment in health (and education) contributes to economic growth in the long term by creating a healthier, better educated, and therefore more productive labour force (see https://globalizationandhealth.biomedcentral.com/articles/10.1186/1744-8603-9-43).
The UK currently spends 9.9% of its GDP on healthcare. If the UK was to commit the same as the average amount spent by other European countries on healthcare systems (10.7%), this would mean an extra £15 billion each year for the NHS.
In 2015, a debate in the House of Lords indicated that there will be an inquiry into the sustainability of the NHS. During this debate, peers suggested a move away from a tax-funded NHS . Instead, alternative forms of funding the NHS should be considered, such as compulsory insurance or patient charges. This runs contrary to the findings of a recent inquiry commissioned by the King’s Fund – The Barker Review (see link below) – which largely rejected the idea of user charges and called instead for more taxes (e.g. an increase in inheritance tax, capital gains tax or national insurance contributions, or a new wealth tax).
The inquiry into the long-term sustainability of the NHS was set up in May 2016 when the (unelected) House of Lords appointed a Select Committee to focus on
- resource issues, including funding, productivity and demand management;
- workforce, especially supply, retention and skills;
- models of service delivery and integration;
- prevention and public engagement; and
- digitisation of services, Big Data and informatics.
The Select Committee on Sustainability is due to report in March 2017. For details of its work, including evidence submitted to the Committee so far, see http://www.parliament.uk/business/committees/committees-a-z/lords-select/nhs-sustainability-committee/
For details of members of the Committee, see http://www.parliament.uk/business/committees/committees-a-z/lords-select/nhs-sustainability-committee/news-parliament-2015/committee-appointed/