Even with the extra funding pledged in the latest spending plans for Wales, it is crucial that Wales focuses on integrated care if it is to weather the tough times ahead, says Anita Charlewsorth

On Tuesday, the Welsh government published its 2017-18 spending plans, detailing how the budget of just shy of £15bn will be allocated across the public services devolved to Wales.

The size of the country’s public service pot is the product of the spending decisions taken in Westminster in the 2015 spending review, and applying the Barnett Formula to work out the Welsh pie.

That pie is shrinking in real terms. The precise details are still subject to much uncertainty in advance of the UK Autumn Statement. But analysis by the IFS shows that if the Welsh government leaves income tax rates unchanged and assuming no change in UK government policy, the resource budget would be 3.2 per cent less in real-terms in 2019-20 than in 2016–17. The cuts are back ended. There is a relatively small reduction in 2017-18 (0.3 per cent) which then builds up in 2018-19 (1.4 per cent) and 2019-20 (1.6 per cent). The budget process is tough.

The NHS in Wales is under pressure and finances are feeling the strain. At the end of 2015-16, it had overspent its allocation by £50m and cost pressures are rising

For all governments, health looms large in budget setting decisions, but nowhere is this truer than Wales, where almost half of total public spending goes on health. That means growth money for health has to be paid for by cuts to other services. Sympathy for politicians tends to be low but these are the judgements of Solomon.

Healthcare was the big winner in Tuesday’s announcement. Resource funding for providers will increase by £240m in 2017-18 in headline cash terms. This, along with other announcements, means a 2.2 per cent real terms increase in funding for the NHS, and is extremely welcome.

The NHS in Wales is under pressure and finances are feeling the strain. At the end of 2015-16, it had overspent its allocation by £50m and cost pressures are rising – most notably the agency staff bill, which increased by 60 per cent last year alone.

The growth in health spending per person is low by historic standards over this decade in Wales (see chart). Even with this injection of funding next year, the task remains daunting – to spend the same amount per person after allowing for inflation in 2020 as was spent in 2010. That means efficiency improvements need to be big enough to absorb all the pressures of an ageing population, new technologies and input cost growth.

Nhs spend per head wales 01

NHS spend per head Wales

But, as our recent research at the Health Foundation shows, the NHS faces long-term challenges and public finances in Wales will be under considerable pressure for the rest of this decade. It is therefore essential that this additional money is used to support the transformative change and improved efficiency which will help the health services in Wales to continue to meet patient needs.

Being able to recruit and train the skilled staff that are at the heart of high in quality care will be critical, and alongside funding, the NHS in Wales needs a comprehensive workforce strategy.

Health funding in Wales fell by an average of 0.1 per cent between 2010/11 and 2015/16 in real terms – compared to an average 1.7 per cent growth in spending in England. This caused a lot of controversy and was undoubtedly difficult for the NHS. But the other difference compared to England was that social care – although cut – was not cut by as much. As such, spend per head in Wales in 2014/15 was £397 per head of population, compared to £290 in England.

Fundamental importance

Looking back at the activity data for Wales reveals some interesting trends. Between 2010 and 2015 emergency admissions per person fell despite the ageing of the population (by 0.3 per cent a year on average). At the same time, elective admissions per person increased by 1.3 per cent a year. This experience, added to all the problems hospitals are reporting with delayed discharges, reminds us that getting the balance right between health and social care is of fundamental importance.

Our analysis suggests that over the next 15 years, health funding needs to rise to meet demand and cost pressures but that the pressures on social care are even greater

At the moment there is a growing agreement that social care needs additional funding. Beyond 2017-18 Wales will need to determine how it can ensure that this system is sustainable. In its budget settlement the government announced an additional £25m within the local government settlement for the provision of social services.

Our analysis suggests that over the next 15 years, health funding needs to rise to meet demand and cost pressures but that the pressures on social care are even greater. The evidence on the optimal mix of health and social care funding remains very limited. When funding is so scarce, how to spend or cut the marginal pound is a vital, if unenviable, decision.

Political priorities and public preferences both have a key role to play in those decisions. But the last few years should have reminded us that it is vital to develop a much deeper understanding of how our different public services work together. Stephen Dorrell recently said the NHS is not a city on a hill – and if that is true now, how much truer will it be in future as we look to meet the needs of an ageing population.

Anita Charlesworth is director of research and economics at the Health Foundation