Injection of 'long-termism' vital to deliver an NHS fit for the future

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02 May 2023

Sandy Cook
Senior Policy Officer (Finances)

As financial pressures continue to mount, the NHS will do everything it can to deliver a stretching efficiency ask, but the government must play its part too.

The NHS is facing immense financial and operational challenges. But its ability to meet those challenges is threatened by short-term fixes. We need a vital injection of long-termism to deliver an NHS fit for the future.

Rewinding to last year's Autumn Statement, the chancellor announced a welcome financial boost for the NHS. An additional £3.3bn in 2023/24 and again in 2024/25 was allocated to offset inflationary pressures and to improve performance across emergency, elective and primary care. The Spring Budget, meanwhile, focused less on investment in public services and more broadly on measures designed to address key economic challenges including sluggish growth and labour market flexibility.

One aspect of this national productivity drive does have the potential to benefit the NHS. For some time, NHS Providers has called for meaningful reform of the pension system to prevent the drain on the NHS' staff base. We hope that the removal of the lifetime allowance, and the extension of the annual allowance, will eliminate the disincentive for staff to take on extra shifts by removing the threat of unpredictable in-year tax bills. These measures should have a positive impact on the NHS' ability to retain senior clinical staff. Indeed, the Office for Budget Responsibility forecasts that the pension reforms will increase overall employment by approximately 15,000 people.

NHS vacancies remain stubbornly high – now totalling over 124,000.

Sandy Cook    Senior Policy Officer (Finances)

However, as the Institute for Fiscal Studies points out, it is equally possible that by offering more generous pension allowances, staff may be encouraged to build up their pension savings at a faster pace resulting in more experienced staff retiring earlier. Given this mixed picture, the pensions reforms need to act as one part of a package of measures to incentivise senior clinicians to remain in the service.

NHS vacancies remain stubbornly high – now totalling over 124,000 – and the pressure on an already overstretched workforce continues to exacerbate existing operational challenges. This is why the NHS Long Term Workforce Plan is absolutely crucial. The government must commit to fully funding a workforce plan made up of independently verified workforce projections to ensure the NHS has the staff it needs for the next five, 10 and 15 years.

Concerns are mounting, though, because while the plan is expected to be published by the summer the chancellor is yet to confirm when the funding required to implement the plan in full will be available.

There is also ongoing uncertainty surrounding capital investment. Despite a considerable amount of noise, trusts involved in the New Hospital Programme are increasingly frustrated by continued delays to an announcement on the programme's funding and schedule. There are further concerns that the £3.7bn notional capital envelope set aside for the programme over the current Spending Review period will not stretch far enough. Inflationary pressures and delays to construction have significantly escalated costs of projects of trusts already in the programme.

What's more, a form of light-weight concrete – reinforced autoclaved aerated concrete – presents a serious safety risk in a number of NHS sites. Initially expected to have a lifespan of around 30 years, some trusts have used this material for more than 50 years. Urgent remediation is required, but the Budget left the issue unaddressed.

Given how stretched the existing budget already is, frontline services are at risk of being cut or severely scaled back if the pay award is not funded centrally.

Sandy Cook    Senior Policy Officer (Finances)

The provider sector also awaits clarity about the funding implications of the pay offer made to Agenda for Change staff, following the positive steps taken so far to come to an agreement between unions and government. Last month, the chancellor indicated the Treasury is willing to provide additional cash to public services to fund the pay award. This is absolutely vital. The NHS only has flexibility within its existing budget to cover a pay award uplift of 3%. That's 2% lower than the government's offer.

Given how stretched the existing budget already is, frontline services are at risk of being cut or severely scaled back if the pay award is not funded centrally. The government's decision not to fund last year's pay award meant that NHS England was forced to make up the shortfall by scaling back funding to transform diagnostic treatment and improve trusts' digital capabilities. Failing to fully fund the pay award for a second consecutive year could impact providers' capacity to meet demand for services, and the ability of the NHS to transform and modernise itself to keep up with the demands of the future.

As trusts enter the new financial year, concerns remain about the underlying financial pressures bubbling under the surface. Energy and medicines costs are still spiralling upwards given inflation. As demand for NHS services continues to outstrip capacity, trusts escalation beds being opened up to plug the gaps, and ramping up additional capacity comes with a considerable price tag. Workforce pressures also continue to force trusts to contract out more expensive, agency workers. What's more, providers are being asked to tackle these challenges whilst simultaneously delivering stretching efficiency targets.

The financial and operational pressures facing trusts are substantial. Trusts will continue to do all they can to meet national performance targets over the next year. But to succeed, they will need the government to give long-term solutions the green light.

This opinion piece was first published by Public Sector Focus.

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Sandy Cook
Senior Policy Officer (Finances)

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