Following the Money: How far does £22bn go?

How much is £22bn? It depends on who you ask.

The headline figure is evidently a big number, but there are serious questions about how far it will go, or, more accurately, what extra activity it will buy.

Much of the cash – which is coming over this year and next year – has already been allocated.

Pay deals this year take up just over £6bn, with another £500m coming from unfunded elements of the previous year’s award, according to documents published alongside the budget.

Given that’s an annual cost that will recur next year, more than half of the injection is already accounted for.

Another slice of the cash will have to cover the rate of spending so far this year, as provider costs continue to outstrip funding growth.

Reassuringly, a spokesman for the Treasury said the NHS would be reimbursed for the cost of higher employers’ national insurance contributions. Less reassuringly, they were unable to confirm exactly how much this would be.

They said: “Additional funding has been set aside for the public sector to cover the NICs increase, but given the complication of this policy, the allocation to departments will only be made at the next phase of the spending review. This will help protect the spending power of the NHS from the direct impacts of these employer NICs changes.”

Given the Treasury’s custom of only partially funding additional cost pressures in recent years, exactly how much the NHS will get is likely to be contentious.

And that’s before factoring in the indirect employment costs faced by care agencies and non-NHS community services providers, who are not getting anything from the Treasury and will have no option but to pass on pressures to the health service.

Another sizeable chunk of the uplift has actually been paid out already on electives, which according to the Treasury have received just under £900m in July and another £1.8bn since then.

This is understood to be a consequence of systems over-performing against their elective recovery targets. If all of the funding was to pay for extra waiting list work, as the government claims, there has been little fanfare about what would be a major good news story. At the time of writing, the Treasury had not responded to a request for comment.

Nor did the Treasury confirm whether trusts would continue to get this funding for the rest of the year, amid rumours about elective funding being capped.

So, what does this mean for the NHS? NHS England still seems to be working through the details. Following the Money hears that two national calls this week, which were widely seen as relating to the budget follow-up, have been cancelled.

Next year’s budget already looks implausible

Even the headline growth rate may be misleading. The chancellor arrived at an average growth rate of 4 per cent over the two years. But this is “significantly frontloaded”, according to the Office for Budget Responsibility, and had been boosted by the budget documents stripping out some 2023-24 transfers to make the year-on-year increase look bigger.

Next year’s real terms increase, at 3.3 per cent, is actually lower than the long-run average the health service has received since it was created. Far from ending the begging bowl culture, it seems almost certain the new government will have to re-open next year’s settlement, given the commitments on extra appointments and other service expansions.

The revenue envelope also raises questions about an undeniably generous capital boost, given the propensity of the previous government to raid the capital fund when day-to-day spending is tight.

Although the latest round of capital “surrenders” was finalised under Labour, ministers probably had little choice given in-year spending pressures. The acid test is whether they manage to “break the cycle” of capital raids in future years.

‘Read the room’

There’s a risk of public expectations being inflated and then dashed, given that much of the £22bn will not be available to buy extra care.

Wes Streeting has taken a robust line, signalling that the NHS will be expected to deliver more efficiency savings in exchange for the funding.

He told The World At One: “Of course it’s right to say that there are rising cost pressures… where I part company with some of the voices that are out saying ‘oh, more money is needed, this isn’t enough, this isn’t enough’, read the room.”

The health and care secretary added: “There’s a challenge to the system as well, which I’ll be setting out to NHS leaders… we’ve got to improve productivity but also ask some hard questions about where money already goes in the system and how it could be better spent.”