The real funding debate: how to spend it

As the Chancellor unveiled his Spring Statement he claimed to be in a more tiggerish mood. With ever so slightly improved growth forecasts the Treasury might be prepared to spend more in the next Budget and of course in next year’s Spending Review.

There is growing speculation that the Cabinet is beginning to support a significant boost in healthcare funding, potentially with any announcement timed to coincide with the NHS’s 70^th anniversary. Yet even after debating the how and the why for years, increasing the NHS budget will raise more questions than answers.

Funding needs

As the NHS enters its eighth full year of austerity, those in the service may struggle to believe that it has taken so long for politicians to face the inevitable. Few policy issues have been more discussed and debated than health funding in recent years.

Already subject to dozens of think tank reports and policy inquiries, the topic is still being agonised over. Organisations such as the NHS Confederation, Institute for Fiscal Studies, the London School of Economics and the IPPR are all undertaking new reviews of the NHS at 70^th and funding needs.

These studies, past and present, nearly always focus on a standard set of questions, and typically reach the same answers.

Question 1: How much. Through a variety of increasingly sophisticated economic models the conclusion is often around £20 to £30 billion.

Question 2: How to raise it. Despite occasionally flirting with “new” models of financing ,the conclusion is always through general taxation. Occasionally there is the curve ball suggestion of diverting funds from other parts of the welfare system. According to reports, the Cabinet might be inclined to adopt tax solutions to avoid putting undue burden on a shrinking earnings base such as taxing assets and wealth or national insurance for working pensioners. Some in government are reported to be attracted to a hypothecated tax as a more politically palatable solution. Failing that the Treasury might simply find it easier to borrow more.

Question 3: Why. A well-rehearsed ensemble of international comparisons, historic trends and service pressures. From nearly every perspective, the NHS receives less funding compared to comparable health systems, current funding levels are well below previous growth rates and finally nearly every part of the NHS is struggling to keep up with patient demand and expectations.

Intensive lobbying

Yet what these studies rarely consider is how to spend any extra billions that the government can find for the NHS. Having fought one protracted battle with the government to increase funding, NHS England will find itself on the receiving end of intensive lobbying from across the NHS.

Having won the fight for more, how he puts any investment to best effect will be the real test of Simon Steven’s tenure at NHS England

There will be no shortages of calls from different parts of the NHS to be prioritised, each citing years of underfunding and poor investment. Primary, community, mental health, secondary and specialist care will all be able to claim that they need to be at the front of the queue. While Simon Stevens might well expect to be hailed as a saviour, he may lose as many friends as he gains in the delicate process of parcelling out extra investment.

Moreover, if the NHS is to get a funding boost big enough to make a big impact on services the government will want to be certain that it is going to make a difference. A tax fuelled step change in NHS spending will come with strings attached.

There will be those around the Cabinet table that are still having to enforce cuts in their own department that will not be satisfied to see billions and billions funnelled into the NHS without a clear political upside. While the NHS will have its own sense of priorities, improving waiting times for accident and emergency and better access to primary care will be at the top of the government’s list.

Backbench MPs will hope this will put an end to troublesome talk of closing down hospitals, while Number 10 will be hoping to see fewer headlines in the national press. The Treasury will be concerned that putting more money in will ease the pressure to deliver savings or get best value from procurement and purchasing.

There will be those in NHS England and in some parts of government that will want to see more funding genuinely be used as a down payment on reform. Despite setting similar ambitions on the funding announced as part of the 2015 Spending Review, the recent history of pump-priming transformation has been mixed.

In all the past think tank studies on NHS funding, there has been little consideration on what mechanisms can be used to get maximum return of greater spending. The experience in 2000-2009, where spending doubled in real terms, highlights the importance of having good metrics, good control and plans that are aligned to the system’s future needs.

After nearly a decade of drought, a boom in NHS funding might resemble a flashflood of money that is soaked up by deficits. Having won the fight for more, how he puts any investment to best effect will be the real test of Simon Steven’s tenure at NHS England.