This is first of three Health Foundation briefings ahead of the 2017 General Election.
With the local elections over, political attention is now firmly focused on the countdown to the General Election. Over the weekend the NHS figured prominently – with announcements on mental health services and inevitably NHS funding. Funding for health and care services can seem bewildering. The scale is huge – the NHS bill in England is almost £124bn in 2017/18. This represents 15% of all public spending. Future commitments for NHS spending are not marginal; they go to the heart of tax and spending policy.
There are three fundamental issues that any incoming government will need to address if health and social care are to be sustained. First, it is clear that social care needs immediate attention from an incoming government. Social care is severely under-funded and unaffordable for people on low incomes who are ineligible for free care. The government is increasing spending on social care over the next three years, but that’s after a seven-year period that saw an 8% funding cut. The trouble is that pressures on the system are increasing at twice the rate of funding growth. This is partly due to additional need but also increases in the national living wage. The result is a social care funding gap of around £2.1bn by 2019/20.
Second, funding for the NHS in England needs to increase in the next two years. Spending on health care per person in England is planned to fall in real terms by 0.2% in 2018/19 and by a further 0.2% in 2019/20.The pressures on the health care system, combined with a struggling social care sector, mean it is difficult to see how the NHS can sustain quality and access to care for patients with this planned decrease in spending. The minimum option would to be maintain the level of NHS spending per person at a cost of £230m in 2018/19 and £450m in 2019/20. But this would still see health care falling as a share of GDP. A more generous, and arguably realistic, option, is to maintain the share of GDP, requiring an extra £1.4bn in 2018/19 and £2.9bn in 2019/20 for the English NHS in real terms.
The third issue is probably the hardest for the political system to address. Beyond 2020, the pace of funding growth for the NHS and social care system will need to accelerate, taking a greater share of GDP. This will be necessary to keep pace with the increasing and ageing population, rising chronic disease levels, to meet public expectations for health care and to fund new technologies and medical advances. The most authoritative estimates of the spending pressures facing the NHS and care system in the long term come from the Office of Budget Responsibility (OBR), stating that funding pressures will rise by over 4% a year in real terms in the next decade.
Health and social care are vital public services that all of us rely on in times of need. We’ve seen years of funding volatility – from feast to famine and back again – which is damaging for long-term planning and probably undermines efficiency. Short-term action on funding is necessary but not sufficient. The Health Foundation is calling for a new independent body, similar to the OBR, to assess the long-term financial needs for health and social care, as recommended by the House of Lords’ committee on sustainability.
Years of austerity have left the NHS and social care sector in an increasingly perilous financial state. Government funding plans are not keeping pace with demand and cost, and, as a result, these vital services are under serious strain. Whatever the outcome of the General Election, there are big challenges ahead for the health and care system. If we are to deliver the quality service people expect, funding will need to rise – not just in the short term – but year on year. Our social care system is widely recognised as inadequate and needs fundamental reform.
The scale of the funding required for the NHS might lead some to conclude that the health care system is fundamentally unaffordable. The evidence across the globe would not support that view. The NHS model is not broken; all the evidence is that a tax funded system has substantial advantages in terms of efficiency and fairness. But however efficient it is, the health service still has to be resourced properly. If we want the NHS to keep up with medical advances and meet the changing needs of an ageing population, spending will need to rise. This is a challenge all countries face. The Organisation for Economic Co-operation and Development (OECD) has found that the funding pressures in the UK are towards the lower end of many health systems. While increasing funding will be difficult, it’s not impossible. Countries have devoted a growing share of national wealth to health care over the last 50 years. But how we raise additional funding raises new challenges when you consider intergenerational fairness and the squeeze on family finances: average real incomes are still below the peak of 2007. One thing is clear - cutting other public services is not the answer. The problems of delayed discharges from social care should have taught us that robbing Peter to pay Paul doesn’t work.
Anita Charlesworth is Director of Research and Economics at the Health Foundation.
This article was originally published in the HSJ on 9 May 2017.