The comprehensive spending review: the government can’t have its cake and eat it

The comprehensive spending review (CSR) this autumn, assuming it goes ahead as planned, provides a welcome opportunity to look again at what funding our health and care services need. The CSR will set revenue budgets to 2023/24 and capital budgets to 2024/25.

This time last year, the context was clear and well known. Theresa May’s government announced in June 2018 that the core NHS England budget would rise by an average of 3.4% a year in real terms from 2019/20 to 2023/24. The NHS Long Term Plan set out how this money would be spent. On social care, the government was locked in a continuous cycle of annual funding top ups to prevent the collapse of the system whilst it developed a major reform plan.

The government sought to portray the NHS settlement as a generous bonanza. NHS policy experts argued that whilst it was better than the thin gruel of the average 1.5% rises between 2010 and 2018, and generous relative to other public services, 3.4% was below the long term trend growth in the NHS budget. And that the NHS needed 3.3% annual real terms increases to just meet demand growth, 4% to also recover care backlogs and 5% p.a. to transform on top of that.

Over the last nine months that context has changed significantly in five ways.

First, a new government has been elected with clear manifesto pledges on NHS staffing numbers and a major NHS building programme, as well as reform of social care. Second, the NHS care backlog is now much larger due to the impact of COVID-19.

Third, there are significant amounts of extra COVID-19 related demand that will be with us for the next few years include rising mental health demand and patients needing extensive and complex COVID-19 related rehabilitation. Fourth, there is significant, and understandable, pressure on staff pay, fuelled by a strong belief that the contribution of health and care staff to fighting COVID-19 needs to be recognised in their pay. The current main NHS pay deal ends on 31 March 2021.

Fifth, local government finances now look even more dire than they did twelve months ago and COVID-19 has highlighted the need to sustainably invest in our threadbare public health infrastructure. The Local Government Association calculates that local government will have a minimum £7.4 billion financial gap by the end of the year. Many local authorities, who have a legal duty to balance their books, are already having to squeeze health and care related service budgets.

There are obvious impacts for the CSR, best summarised as “extra pressure wherever you look”.

On capital funding the government needs to give the NHS an appropriate capital settlement to meet the manifesto commitment on new NHS building. The NHS’s capital budget has increased in an episodic, announcement by announcement, way over the last few years. These increases need to be locked into the baseline permanently and a significant further increase on top is needed given the scale of the manifesto ambition, the size of the NHS maintenance backlog and its transformation needs in areas such as IT. This needs to be guaranteed for as many years ahead as possible to maximise the value of any investment – for example, the ten year horizon quoted in the manifesto pledge on NHS buildings.

NHS education and training budgets, which are not covered by the May government funding pledge, need to increase to meet the costs of the extra nurses and GP appointments promised in the manifesto. These will have risen since the general election given that COVID-19 will reduce overseas recruitment, meaning we will need to rely on more expensive home grown recruitment and training.

The core NHS England revenue budget will need to be reviewed to match what the NHS now needs to deliver, including backlogs. And there is widespread agreement that any reform of social care, probably the highest priority, will require significant extra investment and this is likely to involve higher public expenditure.

In our early conversations on the CSR, the Treasury has understandably stressed how difficult the government’s overall fiscal position is. But it’s impossible to see how the government can meet its manifesto commitments, deliver the Long Term Plan, deal with the longer term impact of COVID-19, recover care backlogs and reform social care without revisiting the May government settlement.

Above all we need to avoid what the prime minister once memorably described as a “pro having cake and pro eating it” policy. Either health and care funding increases to meet the cost of the demand the sector now faces. Or the government needs to reduce what it asks of the NHS and social care, matching the funding provided. It can’t do both. The public debate on which of these approaches should be adopted needs to start now.

This blog was first published in the HSJ.

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