The headlines
While health was one of the few areas that the Government had pledged to protect heading into the Spending Review, many questions remained about what form this ‘protection’ would take. The centrepiece announcement of additional funding for NHS England was heavily trailed on Tuesday, but it was unclear what impact this would have on other areas of Department of Health expenditure.
As the dust settles, the health and social care headlines are as follows:
- NHS England's budget will rise to £120 billion by 2020/2021
- There will be a real terms 25% cut to the Department of Health's 'Whitehall' budget, with non-NHS England expenditure set to fall by £1.5 billion in 2016/17
- Local authorities' public health budgets will fall by an average of 3.8% in real terms each year, with the ring-fence scheduled to end in 2017/18
- Local authorities will be given new tax raising powers for local authorities of up to 2% of council tax for spending on social care (the Chancellor noted that this would raise almost £2billion by the end of the Spending Review period if adopted by all local authorities)
- The Better Care Fund will increase by £1.5 billion by 2019-20
- The NHS allocation includes £600 million of funding for mental health
- Student nurse grants will be replaced with a loan system
Elsewhere, the Chancellor announced:
- A budget surplus of £10.1 billion will be delivered by 2019/20
- Day-to-day departmental spending will fall by 0.8% each year, with a total of £12 billion cut from departmental budgets by 2019/20
- State pension to rise by £3.35 a week to £119.30 next year
- 400,000 new 'affordable' homes to be built
- Cuts to tax credits will not go ahead
The Stevens Scorecard
Ahead of the Spending Review, Simon Stevens was very vocal on the need for 'front-loaded' investment in the NHS, going so far as to set five 'tests' which the Treasury should meet at NHS England's AGM in October.
While the Chancellor has seemingly accepted the need for front-loading, the initial indication is that it hasn't been a clean sweep:
1. Front-loaded investment in service transformation ✔
2. Phasing of investment consistent with new asks ✔
3. Continuing political support for efficiencies ✔
4. Investment and funding protection for social care ½
5. Making good on the public health opportunity ✖
While Stevens may not be completely satisfied with the outcome of the Review, for the Government there is only one test that matters: whether the NHS can deliver the £22 billion efficiencies set out in the Five Year Forward View.
Over to you, Simon...
Analysis: health a winner, but plenty of pain to come
Mike Birtwistle takes an early look at the implications of the Department of Health’s Spending Review settlement.
On the face of it, the Department Health is one of the ‘winners’ of the Spending Review and, compared to how other departments have fared, it is. Simon Stevens staked a good deal of his political capital and personal credibility on first securing the £8 billion and then obtaining a degree of front-loading. Given his recent public statements, the financial backing received today is probably the minimum required for the Five Year Forward View to remain a credible plan.
This is also a win for Jeremy Hunt at a time when he needed one. The rest of Whitehall is weary of austerity and special pleading from health in equal measure and, with the Chancellor facing the competing pressures of a punishing deficit reduction target of his own making and a security crisis which definitely isn’t, this settlement is no small achievement. Health’s gain has come at the cost of further pain up and down Whitehall.
The front-loading is important. It may not deliver the transformation funding that some have been calling for, but it does enable NHS England to get moving on some of its flagship initiatives, for example, vanguards and cancer. It is also implausible that the Government will go into the next election on the back of some of the decidedly anaemic increases planned for later in the Parliament (an 0.8% increase in an election year?). We can expect this announcement to be the start, rather than the end, of the discussion on health funding in this Parliament.
It could have been much worse for health, but the success of the settlement shouldn't be overstated. NHS England has secured what amounts to an 8% revenue increase over this Spending Review period. To put this in context, it is broadly equivalent to the increase the entire Department of Health secured over the last Spending Review period. This time, Department of Health revenue will be reduced. The overall figures are worse this time than they were last.
The true impact of spending reviews only becomes apparent when departments decide how to use their money. There will be plenty of devil in the detail for health. We don’t yet know what the NHS England ringfence will cover. It is entirely plausible that additional funding expectations will be loaded on the NHS. On top of this, NHS England may well have to underspend by several hundreds of millions next year to offset provider deficits, particularly given that there will be less slack in central budgets.
Although the NHS has once again been protected, the same cannot be said for the Department of Health. Public health, training and the budgets of arm’s-length bodies such as the Care Quality Commission and NICE will all be particularly vulnerable to the savings required to achieve the degree of front-loading the Chancellor has been able to deliver.
How the delivery of these savings is handled will be critical to the extent to which they have a knock-on impact on the NHS. A major cause of the current NHS deficit is shortages in permanent staff. It is easy to imagine how reductions in training budgets could further exacerbate this pressure. Severe reductions in public health funding (and the removal of the public health ringfence part way through the Spending Review period) are likely to take a significant toll. Our work for the Advisory Group on Contraception shows how some public health cuts could have an immediate impact.
The raid on training and public health to prop up the NHS budget must call into question whether the Five Year Forward View coalition – painstakingly pieced together last year – can endure. This is a settlement that favours the NHS, but not so much health. Given this trade-off, the other arm’s-length bodies may feel less inclined to support NHS England in future.
As Bill Morgan wrote back in May, delivering financial recovery is easy, it is doing it safely which is challenging. Jeremy Hunt has placed huge emphasis on the Care Quality Commission as the means to ensuring that quality does not slip at a time of financial constraint. Whether it can continue to do this with much reduced resources remains to be seen. The Secretary of State’s personal vision for the NHS in a post-Francis world is at stake.
Good headlines this week should not mask the pain still to come. Plenty in the health service still view the £22 billion savings target as heroic and the health service must fund 7 day working – a cost pressure additional to the Five Year Forward View – from within this envelope. And this is before the impact of continued pressure in social care and further cuts in public health are taken into account. There is plenty of hard work to be done and bruising decisions to be taken before this number can be translated into an achievable plan.
The settlement also does little to diminish the immediate political challenge. The junior doctors are still set to strike (although it appears that the Government has agreed to ACAS conciliation so there may be light at the end of this particular tunnel) and NHS performance continues to head south. There will be a tough winter to navigate before the Spending Review even takes effect.
The coming weeks will tell us more about what the Spending Review will mean in practice. Those working in the NHS will (and should) have slightly more spring in their step than they might have expected to in recent weeks. The future is less gloomy than it might have been, but it is gloomy nonetheless. For those seeking to influence the difficult financial decisions facing the NHS, knowledge of how NHS financial flows actually work will be more important than ever in the years ahead.
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Devo's in the detail
While GM Devo has been progressing quietly since the Chancellor announced the devolution of health and social care funding in February, a test of the Government's commitment to the project was whether it would grant its request for a £500 million loan to 'pump prime' devolution. It would appear that the Chancellor has decided not to grant this request for the time being, although it was announced that the Combined Authority will gain greater control of €415 million of European funding, as well as the ability to levy supplementary business rates.
The Chancellor did highlight the additional devolution deals that have recently been signed with a number of areas, though it appears that a GM Devo-style devolution of healthcare responsibility for these areas is not currently planned:
- Cornwall
- Sheffield
- Liverpool
- Tees Valley
The new ability to vary council tax rates to fund expenditure on social care further demonstrates the Treasury's willingness to devolve control over funding (as well as difficult decisions).