10 quick reflections on...

The new long-term NHS funding settlement and what happens next

Chris Hopson profile picture

25 June 2018

Chris Hopson
Chief Executive
NHS Providers

At the beginning of last week, prime minister Theresa May set out proposals for a long-term NHS funding settlement of an extra £20.5bn by 2023 - an average annual rise of 3.4% above inflation for the next five years. In return for the extra investment, the NHS will be expected to commit to a ten-year plan outlining the improvements that can be delivered for this extra investment. How does the announcement now look a week on? Chris Hopson shares 10 quick reflections on the reactions to the settlement and what needs to happen next.

  1. The range of reactions to the government announcement and the prime minister’s accompanying speech was instructive and seemed to depend on the comparisons made. Those at the positive end compared the settlement to the funding increases the NHS has received over the last eight years, other public services and the wider economic context. The more cautious compared it to long run NHS average funding increases (3.7% annual real-terms increases from 1948 to date) and what experts predict the NHS needs. Using short hand, the NHS needs annual rises of 3.3% to just stand still, given rising cost and demand; annual rises of 4% to recover performance and close gaps following a decade of austerity; and annual rises of 5% to consistently transform in the way envisaged in the Five-year forward view.

  2. NHS Providers has argued for some time that the NHS is over-stretched and under-resourced so we welcome the extra investment. We also agree with seasoned Whitehall and Westminster watchers like Sir David Nicholson who argued that the settlement was a real achievement by Jeremy Hunt and that he played a difficult hand with skill.

  3. Those expressing caution are also right, though. Given the size of the gaps that have opened up over the last few years, there is a lot of gap filling to do. We also have a pay rise to fund. And that’s before you start thinking about transforming the NHS to join up care and enhancing NHS performance – for example by significantly improving cancer and mental health outcomes. All on an average funding increase of 3.4% when we need funding increases of 3.3% to just stand still.

  4. Our cautious tendencies have been heightened by the aggregate commitments made by the prime minister and the health secretary. These ranged from eliminating provider deficits and recovering performance standards to driving a technology revolution and delivering much better cancer and mental health outcomes. But the central question was largely ignored – can the NHS actually recover its performance and finances; close the workforce gap; afford a pay rise; keep up with rapidly rising cost and demand; transform; and deliver significantly enhanced performance, all on average annual funding rises of 3.4%?

  5. One key motivation for this expectation raising on what the settlement will “buy” was the need, as the chancellor acknowledged later in the week, for tax rises to fund the settlement. It is difficult to argue that potentially unpopular tax rises will only be used for gap filling and recovering the NHS’s position to where it should have been. The NHS needs to show the taxpayer the exciting extra things their extra taxes will buy. But inflating expectations too much risks locking the NHS into the same ‘failure to deliver an impossible task’ that has blighted us for the last four years.

  6. This is why the other side of the equation – what the NHS can deliver for the settlement – is now so important. The NHS 10-year plan must be ruthlessly realistic and set a deliverable ask for the NHS frontline. Honesty about how quickly we can recover performance and financial gaps will be vital, with a strong emphasis on how we create a robust plan to quickly tackle current workforce shortages. Hard choices between attractive, desirable, competing priorities will be essential.

  7. How this plan gets created is crucial. The prime minister argued that trust leaders need to be held to account. But it’s difficult to hold people to account if the task they are being set is impossible to deliver and they have no hand in its creation. Given the experience of the Five-year forward view, trust leaders must own the plan and be accountable for it. But to do so, they must be deeply involved in its creation and be able to assure themselves that it’s deliverable. We will need to work out how this vital process relates to any other processes connected with the creation of the plan – such as the idea of an NHS Assembly.

  8. Central to the debate will be the level of productivity and efficiency gains the NHS can make over the next five years. The government believes that recent projections of efficiency savings at the average of the last 20 years (0.8%) are too conservative, with the average of the last five years (1.6%) more appropriate. The Carter Review and the GIRFT programme will help here. So would major investment in the basic underlying IT infrastructure that too many trusts lack. But given how over-ambitious the Five-year forward view was in estimating productivity and efficiency gains, much more detailed work is clearly needed. This must be done in close collaboration with the provider sector – for example to identify what support and investment would be needed to reach a more ambitious level of gain. NHS Providers will be undertaking work in this area over the next few months, drawing on the experience and expertise of our members.

  9. Another key question is what happens to the health and care budgets left out of the settlement – the social care, public health and training budgets that sit beyond the core frontline NHS spend. We can understand why settling these areas ahead of the spending review proved a bridge too far, particularly given their intimate relationship, in some cases, with wider local government finances. We also welcome the “protection commitments” in these areas but they must turn into concrete positive financial outcomes. If those budgets are held at current levels, the settlement is actually only an average 3% increase. We are also worried about the potential time lag for a spending review process whose first year will be 2020/21. What happens to an increasingly fragile social care sector in the meantime?

  10. The final thought is about how to ensure that we spend the settlement thinking of the future, not the past. The Five-year forward view vision remains compelling – we have to move rapidly towards new models of care, with a significant investment in community services and primary care. If we just spend this extra money in the same way that we currently do, we miss a big opportunity. It’s difficult to avoid a slight sense of déjà vu here as this was exactly the argument we had about the sustainability and transformation fund last time the NHS got a multi-year settlement – and look what happened to that. We must ensure a different outcome this time!

About the author

Chris Hopson profile picture

Chris Hopson
Chief Executive

Chris Hopson is the chief executive of NHS Providers. He joined in September 2012 after a career in politics, commercial television and the civil service. Read more

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