The 18-month plan

It is now a year since the publication of the Five Year Forward View. In many ways it has been a success – it has effectively made the case for £8bn of additional NHS funding and deftly bound together the service and politicians into a common agenda, moving the debate on from the Health and Social Care Act.

But – and it’s a very large but – progress in one area has been lacking: the question of how to make the finances add up. The Forward View said that if the government found £8bn extra in real terms for the NHS by 2020, the funding gap would be filled by this plus £22bn of efficiency savings.  

So one year on, where are we now? The short answer is, unfortunately, way off track. NHS trusts and foundation trusts had a combined overspend of £930m in the first three months of this year, equalling the whole of last year. The NHS is spending around £10m more than the income it receives every day. At this rate, the NHS will simply run out of money at some point later this financial year.

There are two issues: ensuring the NHS is sustainable in the medium term; and ensuring it survives the short term to reach the medium.

Looking ahead to 2020, we are still waiting for a coherent plan for how to deliver the £22bn. This week Lord Carter, appointed by the government to look at improving efficiency in the NHS, called out to hospital trusts in England to plan and drive their own savings targets. He draws on the excellent work of Professor Tim Briggs, the newly-appointed National Director for Clinical Quality and Efficiency, which reminds us that we don’t have to abandon quality to improve efficiency.

In many cases better quality goes hand in hand with improved efficiency. But this is not the same as a system wide plan, which should include: training enough staff quickly and reforming the payment system; support for individual organisations; and ensuring the people working across the NHS are engaged with the change. NHS Improvement is a welcome nod in the right direction but the support offered is based on the view that it is just a few struggling organisations that need help – in fact, 80% of providers can’t balance their books.

However, even with all of these actions it is unlikely that the NHS will come out of its short-term situation quickly. Lord Carter’s work identifies significant and unwarranted variations in procurement and in clinical care which if acted on may reach £5bn saving across the NHS – but not until 2019/20. Capping agency spend is likely to prove difficult at a time when safety remains the Care Quality Commission’s number one concern.

Put bluntly, there is no credible plan for how the NHS survives the next 18 months. The gravity of the challenge is so great that it’s not surprising people are not keen to talk about it. The list of actions taken by other health systems in responding to similar financial predicaments is short and unappealing: cut staff numbers/pay, cut drugs costs, cut services, increase charges. There is no magic bullet out there that will deliver reduced costs in the timescale needed and without consequences we would rather avoid.

One option is to cut areas where the impact is less visible immediately. £200m has already been taken out of public health budgets. Whether education and training monies should be considered in or out of the NHS’s ‘protected’ ring-fenced budget is a battle likely to be raging on Whitehall. To make small savings today at a long-term cost would be unwise, and only contributes further to the challenges.

Another option is extra money. The Department of Health only managed to survive 2014/15 due to a combination of a £250m bailout from the Treasury, and the transfer of £640m of capital budgets into day to day spending. In our submission for the Comprehensive Spending Review we suggested that the government should look at the capital budget not as a bailout fund but to support a transformation fund, with an emphasis on realising the efficiency opportunities that exist across the service.

Any additional funding over and above that already committed looks very challenging, as well as reducing the imperative for the NHS to cut out waste. Government spending plans already imply a further round of substantial cuts to other public services, but deepening these cuts to provide extra resource for the NHS would be exceptionally hard. It’s also unclear the public would support such a move; British Social Attitudes data shows that 58% of respondents say they would not be willing for the government to spend less money on other public services in order to maintain the NHS at its current level of service.

The Forward View did not set out to - nor has it become - the plan for resolving the short-term challenge. Further work is required to show how savings can be made by 2020. But even more urgently, what is needed now is an 18 month plan, setting out a coherent, coordinated set of actions for the NHS to regain financial control while maintaining quality of care. It needs to be utterly realistic as to what is deliverable with the available resources, and political honesty as to whether extra resource will be forthcoming.

The last thing the NHS needs at this moment is panic. It does need however a full appreciation of the financial situation the NHS is in – and a credible set of actions to deal with it.

This blog was co-authored by Anita Charlesworth our Chief Economist. Richard Taunt is Director of Policy for the Health Foundation www.twitter.com/RichardTaunt