Hunt has averted a crisis - but for how long?

The economic backdrop to the Chancellor’s Autumn statement couldn’t have been much worse. Some of the statistics are jaw dropping; the economy is forecast to be no bigger at the end of this parliament than at its start, while the OBR is forecasting a once in almost a century fall in living standards, with average real household disposable incomes expected to fall by 7.1 per cent this year and next.  In this context, the headline injection of an extra £3.3bn a year for NHS England in both 2023-24 and 2024-25 was a more positive outcome than most people probably feared. But how far will this extra funding go towards meeting the challenges facing services?

The extra funding announced by the Chancellor will mean that for this parliament as a whole (2019-20 to 2024-25), NHS spending will increase by an average of around 3 per cent a year in real terms. That is slightly less than the increase promised when Theresa May announced £20bn extra for the NHS to mark its 70 anniversary, but is almost double the rate of growth through the decade leading up to the pandemic. 

While that headline may seem reassuring, zone in on the next two years and the increases start to look more like the preceding decade of austerity. For NHSE, the extra money means spending can rise by 2 per cent each year in real terms. NHSE’s budget makes up almost 90 per cent of total health spending. The other areas included are workforce education and training, capital and public health. The Autumn Statement reduces the funding available for workforce education and training and public health, while providing an extra £1.4bn per year of capital funding in both 2023-24 and 2024-25. Once inflation is factored in, total health spending will rise by just 1.2 per cent a year in real terms between 2023 and 2025, significantly less than the long-term average of 3.7 per cent and very similar to the level of increase from 2010. 

Of course, the context now is very different to 2010. Industrial action is looming, there are significant staff shortages, the backlog maintenance bill tops £10bn and the waiting list for elective care is over 7 million. Not to mention the ongoing impact of the pandemic. Stabilising and beginning to improve services is going to be incredibly challenging in this context. It depends on resolving the pay dispute quickly, covid-19 and flu being relatively benign this winter, improving the flow of people through the health and care system and finding productivity improvements. The government needs to be realistic – there is no slack in a system that has been through a massive shock with the pandemic. 

Health Foundation projections show funding for the NHS and social care will need to rise by more than 3 per cent a year between 2025 and 2030.

There seems to be an expectation in some quarters that the NHS can quickly bounce back to pre-pandemic levels of activity. That world view looks very disconnected from reality. One of the big conundrums is that over the last 2 years the number of people working in the system has increased but activity hasn’t. This is measured as a major fall in productivity. But staff report being under huge pressure. Talk among some commentators of a failing service model will only add further uncertainty. A full analysis of what is happening is urgently needed and NHSE need to lead on that. But the data suggest that patient flow is an important part of that story. Reducing average length of stay has long been the engine of improved productivity, but it has now gone into reverse.

The Chancellor at least seems to have learned the lesson that increasing funding for the NHS, while neglecting adult social care (the groundhog-day default of so many previous fiscal announcements) is bad for service users, bad for staff and bad for taxpayers. Social care is receiving more money in absolute terms than the NHS (£4.7bn by 2024-25 in cash terms), a much bigger uplift as a share of its budget, but we need to be realistic about what the extra funding can achieve for a service that is on its knees after a decade of austerity and with staff vacancies up 50 per cent last year.  

Overall, the Chancellor has probably done enough to avoid a major NHS funding crisis before the next election, but whether a further deepening of the workforce and care crisis can be avoided is much less certain. More fundamentally, the abandonment of the health and social care levy leaves a major hole in long-term policy. Over this decade, the number of people aged 85 and over will increase by a third and those at the end of life by a fifth, significantly increasing pressures on services. Health Foundation projections show funding for the NHS and social care will need to rise by more than 3 per cent a year between 2025 and 2030. This is above GDP growth which the OBR expects to increase by closer to 2 per cent a year. The Chancellor’s plans are for a further round of austerity beyond 2025 to get borrowing down. Further cuts to other public services risk real damage to the health and welfare of the most vulnerable. What then is the long-term plan for the NHS and social care?