Will the NHS get the money it needs?

Government funding promises sound good—but they hide potential cuts

Blog post

Published: 10/08/2015

Many senior Whitehall civil servants will spend August locked away from the summer sun, pacing around whiteboards and poring over spreadsheets as they process the Chancellor's order to model cuts of 40% to non-protected departments. Coming on top of years of austerity already, these are cuts beyond efficiency, trimming or skimping. They mean redesigning whole areas of life so that the public sector does less and the private sector more.

The health service looks like the happy exception. It has been promised an additional £8 billion each year by 2020: on top of around to £10 billion to keep up with inflation.  However, there are reasons to inspect this particular gift horse very carefully.

Firstly, we are still uncertain about exactly when the new money will come in. The £8 billion figure comes from the Five Year Forward View. This 2014 NHS policy document suggests the money should help the NHS transition to new models of care, bringing together GPs, community nursing and hospitals. These should then help deliver savings and better quality care towards the end of the decade, once they are up and running.

To make this work the health service needs more spending up front, over the next two years, as these new networks and merged organisations find their feet. But the Government has pledged a budget surplus by 2018, meaning that those are the exact years when the squeeze will be tightest. The Treasury will want to hold most of the spending back until after this, creating a gap in the crucial years when the NHS is supposed to invest.

Secondly, the £8 billion figure was identified by NHS England as the minimum necessary to fill the gap created by more patients needing more treatment. But recent announcements have added more things to the shopping list while assuming the same bill. 7 day working which could cost billions; a new cancer strategy priced at £400m; improved staffing levels in hospitals and a much-needed spending boost for general practice. All good stuff – but all of it will cost money.

Finally, although the Coalition's ring-fencing pledge applied to the health budget as a whole, the Chancellor's promise applies specifically – and only – to NHS England, the powerful body Andrew Lansley put in charge of most English health services.  That makes it possible and tempting to take a significant chunk of NHS England's extra money from the £17 billion the Department of Health spends on other organisations. 

Of course savings could be made here - civil servants and regulators might be popular targets. But the bulk of this spending goes to areas that directly support the provision of NHS services.  These include insuring the NHS against litigation; paying for new buildings and facilities; improving public health; research and development, and almost £5 billion on clinical training.    

Money for training doctors and nurses goes through another NHS body, Health Education England. In the language of the Treasury, it isn't part of the "NHS budget". Yet much of it ends up covering costs in hospitals and other NHS bodies – just as happens with the litigation and research budgets. Of the £4.8 billion spent on professional education and training last year, some £3.2 billion ended up elsewhere in the health system. 

Some of this money will pay for doctors and nurses who actually carry out patient care alongside their senior colleagues as they learn; some will pay more straightforwardly for training. In the long run, the health service cannot afford to lose either.  An under-supply of nurses means hospitals are forced pay high prices to hire expensive, transient agency staff.  Similarly, the research budget supports the costs of providing care to patients in research trials, a vital part of both their individual care and the process of improving medicine.

The health service spends twice as much money treating diabetes as it does on all infectious diseases combined. That figure will almost certainly have risen by 2020, and the deciding factor in how far it goes will be diet and lifestyle more than anything under the control of NHS England. The story is the same for lung disease, strokes and heart attacks.

Yet so far this year we have already seen a £200 million cut to the public health budget which funds preventive services like smoking cessation and dietary support. A survey showed 77% of public health specialists thought this would mean less action on obesity. And once again, some of that funding would have gone straight into the health service – to pay for basic services like flu vaccinations.

You might think you’ve heard a simple answer to the question of how we will fund the NHS over the next five years. A massive sum, as requested by the service itself, has been set aside to settle the issue.

But the reality is much more complicated. When will this new money come in? Is it already being spent on new initiatives? And will it be taken away with one hand from the vital structures that support the health service, to be given to NHS England with the other?

We will start to know the answers with the Spending Review this autumn. It may be that the UK’s budget aims are so steep that the health service simply has to take its share of the pain. But if so, we need to face the consequences head on - not disguise the reality behind the arcana of government accounting.  

This blog was first published by Prospect Magazine. it is reproduced here with permission. 

Suggested citation

Edwards N and Dayan M (2015) 'Will the NHS get the money it needs?' Prospect Magazine.