Facing the funding conundrum

The future funding of health and social care is arguably the big public policy conundrum of our age, argues Nigel Edwards.

Blog post

Published: 25/09/2014

The future funding of health and social care is arguably the big public policy conundrum of our age. Yet, until now, politicians have been reluctant to address the unprecedented financial squeeze facing both the NHS and social care. 

Alarm bells have been sounding about the financial health of the NHS for some time now. Back in 2012 we warned of a yawning £30bn funding gap within a decade; earlier this year we warned of a funding crisis before the General Election; and figures released just last week showed that even the hospitals we’d expect to be financially viable are going into the red. 

The situation for social care is, if anything, even bleaker: cuts of over £600m to adult social care since 2010 mean that almost a third fewer older adults receive publicly funded care now than in 2010. And concern is rising over the quality of social care as austerity bites.   

So, by breaking ranks with the other party leaders and setting out a plan for around £2.5bn of new money for the NHS, Ed Miliband deserves credit.

But with austerity very much still part of the prescription for the cash-strapped public finances, politicians of all colours are keen to burnish their deficit-busting credentials (despite the Labour leader forgetting those crucial lines on Tuesday). It’s hardly surprising, then, that the parties have been reticent to face up to the hard truths facing health and social care, even if they admit grave concerns in private.  

So, by breaking ranks with the other party leaders and setting out a plan for around £2.5bn of new money for the NHS, Ed Miliband deserves credit. He has taken the first step towards busting the myth that the NHS can keep pace with an ageing population with more or less the same budget as it had in 2010, and has laid the ground for a much-needed debate about how we can pay for the kind of health service people expect. 

But, as most people who understand the NHS have made clear, £2.5bn is barely going to keep it out of the red this coming financial year alone. Labour’s big plan is that this money will help transform the NHS to a fully integrated service by investing in staff across community and hospital care. Sadly, the reality of the finances means this looks set to falter at the first hurdle. 

The announcement of additional nurses, midwives, doctors and care workers does respond to some obvious problems. But the specificity of the proposals and the top down way in which the changes are presented is a source of concern. The redesign of complex local delivery systems cannot be achieved by this type of initiative. Indeed the idea that the design of the system is done by the centre may undermine local initiative and make the task of change even harder.      

The real problem for Labour is that a £2.5bn ‘time to care’ fund might work to join up care if it is part of a broader plan for an NHS that has a chance of breaking even. New models of care to make services seamless and cost-effective will require the space to take risks, the cash to try new things, and the time to evaluate outcomes. Transformational change can’t happen when the coffers are empty.

So the parties need to outline their long-term funding plans for the NHS in the future. But, for an opposition party, setting out post-election spending plans seven months out from an election would risk political disaster, especially if those spending plans involved any kind of increase in funding. If Miliband is pilloried for a mansion tax, just imagine what he’d face if he sought to fund the NHS through additional borrowing. 

In any case Labour made clear this week that the fully-costed policy proposal is here to stay. And there’s only so many times a mansion tax or the cash from restricting the winter fuel payment can be spent (once). 

Sadly, without a plan for the NHS to break even in the next parliament, Labour’s ‘time to care’ fund may start to resemble another well-intentioned but problematic policy: the Better Care Fund. Both policies have the right end goal in sight – better care outside hospitals. Both purport to offer an answer to the question of where the money comes from. But both ultimately risk ending up falling into a black hole caused by an underfunded system. 

Small wonder, then, that politicians don’t want to face up to the NHS’s funding problems. 

Suggested citation

Edwards N (2014) ‘Facing the funding conundrum’. Nuffield Trust comment, 25 September 2014. https://www.nuffieldtrust.org.uk/news-item/facing-the-funding-conundrum