Osborne's NHS spending claim disputed

NHS England chief executive Simon Stevens appeared to back this analysis of senior health economists yesterday, when he told MPs the rate of real terms funding growth requested in the forward view was “about twice” what the NHS had seen in the current parliament.

The document, released by the NHS national leadership last week, indicated extra resources worth more than 1.5 per cent a year in real terms were needed over the next parliament to bridge a projected £30bn funding gap by 2021.

It warned without extra funding the health service would be £8bn short at the end of that period, even if it achieves efficiency savings at the maximum level, which would be unprecedented. Over the long run the NHS has managed average annual efficiency gains of 0.8 per cent, the document states, and during the recent years of austerity it has delivered 1.5-2 per cent.

The forward view sets out an ambition to deliver net efficiency savings of 2 per cent a year over the next half decade – perhaps even rising to 3 per cent in the later years.

Mr Stevens told the Commons health committee yesterday the 1.5 per cent a year funding growth was a “big ask” and was “about twice the rate of real terms increases that has happened in this parliament”.

However, he added that it was still “substantially less than” the rates of funding growth that the NHS had received over the medium term or long term past.

Mr Stevens’ view appears to contrast with that expressed by Mr Osborne in an interview last week with Sky News in which the chancellor suggested spending growth “similar” to that provided in the current parliament would meet the forward view’s funding call.

“If you achieved a similar increase in funding over the coming four or five years as we have achieved in this parliament, and you achieve the ambitious efficiency plans that Simon Stevens has identified, then you meet the conditions of this report,” he said.

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“It is funding on a scale that is possible to conceive our country affording.”

However Mr Osborne’s claim about spending in this parliament was disputed by two senior health economists.

Anita Charlesworth, chief economist of the Health Foundation, said the chancellor’s comments were “not true”.

She pointed out that the government’s pledge to ring fence health funding was defined as the Department of Health’s expenditure limit excluding depreciation.

By this measure health funding will have increased by 0.8 per cent a year in real terms by the end of 2014-15, equating to a £4.4bn rise.

Ms Charlesworth added: “It’s broadly in percentage terms half what Simon Stevens is talking about”.

Richard Murray, director of policy at the King’s Fund and a former Department of Health economist, also questioned the claim.

“Did they plan to give them £8bn real terms growth in this parliament? No they didn’t. Does it look like they’re on track to do it anyway? No.”

He added that much of the real terms growth that had been delivered was “slightly accidental” due to factors such as lower than expected inflation.

However Mr Murray said that in the context of overall NHS spending, the extra resources requested on top of the rate of growth in this parliament were not “enormous”.

“The differences we’re talking about are much, much smaller than the gap between the 1.5 per cent and the historic rate of growth that the NHS has always received”.

“I think [Mr Osborne] might be trying to argue that it’s in touching distance,” he said.

A spokeswoman for the Treasury told HSJ that the forward view’s funding requirements could be met if the NHS achieved annual efficiency gains of 3 per cent in the next parliament and the current rate of increase was continued.

The additional funding requirements implied by the forward view appear to amount to more than real terms growth of 1.5 per cent a year.

The document indicates that this level of extra funding would only close the gap if the NHS achieves efficiency gains at a greater rate than has been accomplished during the current period of austerity.

And it makes clear savings at that level will only be possible if “the NHS gets the needed infrastructure and operating investment” to move rapidly to new care models and ways of working.

NHS leaders have yet to put a figure on the upfront investment they think would be needed.

The forward view suggests some of the money needed to “pump prime” new care models could be raised by selling off NHS land and property.

Mr Murray said because of the current financial problems besetting the NHS, the real terms growth might itself need to be “frontloaded”, rather than built up steadily over time to hit £8bn by 2021.

“[Funding] might need to jump very quickly next year and then slow down as you begin to get some of the benefits of these new models and the efficiencies.

“In some ways that’s the logic [of the forward view].”