The extra funding announced by the prime minster for the NHS is real new money, and is welcome. It leaves the service £8bn better off in 2020-21 than it would have been under the previous settlement.
At 3.4% real terms growth over five years, it is only a shade more than the 3.3% per year that the Institute for Fiscal Studies believe is needed for the NHS to stand still. But, it is at the upper end of what the NHS could reasonably expect given the other pressures on the public finances, and is a better deal than any service has had since 2010.
That said, uncomfortable choices are now required as there are multiple calls on the extra resource: recovery on performance and finances; keeping up with rising cost and demand growth; service transformation; enhanced care, for example in mental health and cancer.
Uncomfortable choices are now required as there are multiple calls on the extra funding.
That equation must balance if the forthcoming 10 year plan is to succeed.
In The NHS funding settlement: recovering lost ground, we explore the gaps which will need to be filled if we prioritise recovering performance. It makes clear that, as the plan is drawn up, recovering performance will take time and will cost money. The 10 year plan will therefore have to be realistic about how quickly improvements can realistically be made given the current starting position.
The 10 year plan will therefore have to be realistic about how quickly improvements can realistically be made given the current starting position.
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Recovering performance
We know that the NHS is facing a significant capacity gap across the acute, mental health, ambulance and community sectors. These will need to be filled if we are able to start providing the level of service patients would expect.
- We calculate that last winter the NHS would have needed about another 7,825 acute inpatient beds to hit the four hour accident and emergency standard. A conservative estimate would be that it would cost £894m to provide these extra beds.
- If the NHS is to recover performance against the 18 week referral to treatment standard, that is likely to cost £950m a year for three years.
Bringing the reduced mental health and community nursing workforces back up to 2010 levels would cost an estimated annual £346 million.
Pressures on mental health, community and ambulance services are just as great as those in the acute hospital sector. Bringing the reduced mental health and community nursing workforces back up to 2010 levels would cost an estimated annual £346 million. Given the pressures on these services, recovering – through the increasing the workforce – is only the initial element of what is required. To better meet patient need and demand, further expansion beyond 2010 levels will be required.
Recovering finances
- The cost of eliminating the current trust sector deficit is between £645m and 960m a year. The final figure will depend on whether the commissioner side should always retain a £1bn surplus as it did in 2017-18. Trusts are also currently excessively reliant on non recurrent savings such as land sales. We estimate that a sustainable level of savings would require £500m a year of extra provider funding.
- Tackling high and significant estates risks and preventing any new backlog from arising will cost at least £1.2bn a year for three years.
Tackling high and significant estates risks and preventing any new backlog from arising will cost at least £1.2bn a year for three years.
A credible plan
It will also be important not to assume that any shortfall between resource and aspiration can be filled by setting unrealistic assumptions of efficiency gains. We know that many of the productivity gains achieved by the NHS since 2010 have been aided by holding down spend in areas such as pay and capital, and this cannot continue. Overambitious expectations on efficiency and demand following the Five Year Forward View have locked the provider sector into a pattern of inevitable failure, with most trusts unable to deliver operational and financial targets no matter how hard they work.
It will be important not to assume that any shortfall between resource and aspiration can be filled by setting unrealistic assumptions of efficiency gains.
It is essential that this cycle is broken if the NHS is to retain public confidence, and if the financial rules underpinning the service are to become credible again. To do that, we must understand the likely costs associated with filling the gaps that have opened up in recent years, and it must be acknowledged that fully recovering lost ground would take up a significant amount of the additional NHS spending. How far the NHS is required to recover lost ground, and how fast, will affect how much progress can be made on improving and transforming care, and keeping up with demand.
The 10 year plan must be co-owned by all parts of the service, including the providers that will be delivering the recovery in performance, and the improvements in provision that we all want to see. For that reason, the new plan must be credible with the frontline, and that will require honesty and realism about the trade offs that must be made given the resource available.
This article was first published by the HSJ on 9 July 2018.
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