Keeping up with referrals would therefore require 210,000 procedures to be performed by the NHS per year, over and above the increase (170,000) expected at the time of the long term plan financial settlement (Table 2). This would cost £190m per year between 2021/22 and 2023/24. Clearing the backlog by 2023/24 would require treating 1.3 million patients more a year than the 200,000 estimated in 2017, at an additional cost of £1.7bn per year. Taken together, meeting the 18-week standard by the end of 2023/24 would need an extra £1.9bn per year.
- The coronavirus (COVID-19) pandemic has already led to significant costs for the NHS in 2020/21, with increased spending of at least £34.9bn – almost 24% of the planned health budget this year. For this financial year as a whole COVID-19 costs for the health system could be in the region of around £47bn.
- The biggest areas of spending have been NHS Test and Trace (£12bn) and PPE (£15bn). Even with a vaccine on the horizon, there will be ongoing COVID-19 costs for the health system in 2021/22. Maintaining a test and trace system, ensuring infection prevention and control measures are sustained, delivering sufficient capacity and rolling out any prospective vaccine will all require further funding. The total direct costs associated with managing the pandemic could be around £27bn next year.
- While vital, this spending does not contribute to the NHS long term plan aims of transforming and modernising services, while meeting underlying demand. At the start of the pandemic the NHS was entering the second year of the plan, backed by real-terms funding growth of 3.3% per year for NHS England’s budget. The pandemic has made delivering the long term plan much more challenging and will require significant extra funding.
- The number of patients the NHS can treat has inevitably fallen as COVID-19 has placed new demands on the health system and changed the way care is provided. NHS productivity is likely to be lower in 2021/22 and 2022/23. If productivity falls by 5% in 2021/22 this would increase funding needs by around £7bn. Catching up lost productivity will take time and by 2023/24 front-line NHS services will need £3bn more than currently allocated to deliver core services.
- The pandemic has led to a backlog of care. For elective care there are 4.7 million ‘missing patients’ who have not been referred for treatment (compared with 2019). If three-quarters of these patients are referred for treatment in the coming months, the waiting list could grow to 9.7 million by 2023/24.
- Waiting times are also increasing with 45% of patients now waiting more than 18 weeks. Meeting the 18-week standard by 2023/24 is not achievable – even if the Treasury was prepared to provide all the funding required. It would require an annual average 11% increase in the number of elective procedures being performed each year by the NHS, needing some 4,000 extra consultants and 17,000 extra nurses a year. We estimate that it is more realistic to achieve the waiting time standard and eliminate the backlog of long waits over a 6-year period, ending in 2026/27. To achieve this NHS England would require an additional £900m on top of the current spending plans.
- The mental health consequences of the pandemic are a source of considerable concern. On average over the next 3 years we estimate that there could be 11% more referrals a year, costing between £1.1 and 1.4bn extra each year.
- Excluding the costs associated with directly managing COVID-19, restoring waiting times, additional mental health demand and lower productivity will cost around £10bn extra next year, if the NHS is to have sufficient resources to deliver the long term plan.
- The extra money for front-line NHS services needs to be matched with up to £1bn extra a year in each of the next 3 years for the workforce, up to £3bn extra for public health and an additional £1bn a year for capital investment in the NHS. Without investment in these areas, the NHS will not deliver the ambitions in the long term plan and will lack resilience for future health shocks.
- We estimate the overall additional cost pressures for the health budget as a whole in the wake of COVID-19 in the overview chart below.
- This year and next COVID-19 is likely to result in extra health costs of around £40bn a year –around 2% of pre-COVID-19 GDP. Most of these costs are temporary but not all. COVID-19 is likely to lead to an increase in NHS funding pressures over the medium term of around 0.5% of GDP.
- There are choices and trade-offs about both the short and long term. If the government wants services to recover quickly and run as fully as possible this winter and next year, the NHS will need more funding. Beyond the pandemic the scale of additional costs depends on the government’s decisions about waiting times and its long term plan commitment to modernise and transform services.
All numbers in this long read are in 2020/21 prices using the October 2020 GDP deflators at market prices.
Overview: overall additional cost pressures for the health budget
Before the COVID-19 pandemic, NHS England was in the first year of a 5-year funding settlement which provided average annual spending increases of 3.3% a year in real terms between 2018/19 and 2023/24. While this was substantially higher than recent years, it was below the historical average of 3.7%.
The additional funding is broadly in line with projections by the Health Foundation and the Institute for Fiscal Studies (IFS) that maintaining current standards of care, with a growing and ageing population, and a rising burden of chronic disease, would require health spending to increase by 3.3% per year.
But crucially, the Health Foundation and IFS analysis showed that the 3.3% increase was needed across the totality of the health budget, including: capital, workforce education and training, and public health, not just for the day-to-day running costs of the services overseen by NHS England. Building on the funding settlement, the NHS long term plan was developed with ambitious goals, particularly to shift care away from hospitals and for funding commitments in mental health and primary care. Previously, we estimated how the NHS planned to allocate the additional spending between different services (Figure 1). Primary care, community services, and mental health were set to grow as a share of overall NHS spending, with a third of the funding growth ringfenced for these services.
The funding proposals in the long term plan were only sufficient for acute and specialist hospital activity growth of around 2.3% per year to 2023/24, well below historical activity growth rates (Figure 2).
The amount of activity that can be provided within a given budget is critically dependent on pay. The latest Agenda for Change staff pay deal means that pay for most NHS staff will rise in real terms until 2020/21. The Health Foundation and IFS analysis assumed that to recruit and retain staff, pay would need to keep up with expected earnings growth across the economy as a whole (2% a year above inflation). Lower pay growth would allow higher activity growth but would create a new challenge: after years of below inflation pay increases and ongoing challenges in recruiting staff, it is hard to see how the NHS could further constrain pay while recruiting and retaining enough staff. The economic impact of COVID-19 will affect earnings growth across the economy although the precise scale and duration of impact is uncertain. This may lead some to conclude that NHS pay can therefore grow at a lower rate over the next few years. But this assumption needs to be balanced against the impact of COVID-19 on the number of staff that need to be recruited and retained.
The impact and cost of COVID-19
COVID-19 and the NHS
In the spring, as the pandemic took hold, there were legitimate concerns about whether NHS capacity could withstand additional COVID-19 hospitalisations. Years of underinvestment has left the NHS with low levels of doctors, nurses, beds and diagnostics, relative to other countries. Combined with a longstanding inability to move more care from hospitals into the community, this meant a service with severe workforce shortages, rising waiting times, very high levels of bed occupancy, inadequate ambulatory care in the community and ageing estates in need of repair.
In its assessment of the resilience of European health systems to COVID-19, the OECD acknowledges that many countries rapidly created surge capacity in the spring – with temporary field hospitals set up, regular hospital beds converted into intensive care beds and patients transferred to hospitals with spare capacity or other settings. The NHS’s own response to COVID-19 has seen dramatic changes in how health services are delivered and used. ‘Medically ready’ patients were discharged from hospital, supported by emergency legislation and funding for support packages, with community NHS trusts overseeing coordinated hospital discharge programmes (‘discharge to assess’). Concerns were later raised about the discharge of patients with COVID-19 to care homes.
Hospitals in the independent sector were block-booked, giving the NHS priority access to around 10,000 additional beds for urgent surgery or COVID-19 patients. Temporary hospitals (Nightingales) were built, creating new facilities with space for thousands of additional critical care beds. NHS hospitals experienced significant increases in demand for critical care facilities alongside reduced demand for, and the postponement of, non-COVID-19 services. Elective admissions in May 2020 were 70% lower than in May 2019, and GP referrals to specialist care reduced by 71%. Many outpatient services transitioned from face-to-face to digital. Extensions to the ‘call before you walk’ scheme were piloted to allow NHS 111 services to directly book patients into A&E. New crisis services for mental illness were developed.
In primary care the introduction of digital triage, the rapid expansion of remote consultation, and the creation of ‘hot hubs’ to manage potentially infectious patients across GP practices were mandated from March. GP appointments fell by about 30% in March and April and the proportion of consultations carried out face-to-face reduced from 70% before COVID-19 to 23% during the pandemic.
There are significant concerns about the impact of the pandemic on patients waiting for specialist care. Prior to COVID-19, the waiting list for elective care had grown from 3.3 million at the end of 2015 to 4.4 million at the end of 2019, with new patients adding to the list faster than those already waiting were being treated. So far in 2020 the pandemic has not led to an increase in the number of people waiting for care – the waiting list is slightly smaller than at the end of 2019. But this is because the reduction (32%) in the number of patients treated from the waiting list was exceeded by the reduction (34%) in the number of people being referred for treatment. Patients who are on the waiting list are experiencing delays caused by the pandemic: by the end of August, 46% had already waited longer than the 18-week standard, almost three times more than in August 2019. While the full impact on access to elective care is still emerging, tackling the backlog of people waiting for care and reducing waiting times will be a key challenge for the NHS going forward.
There are also concerns about growing need for care in some areas. The impact of the pandemic on mental health has been severe and is likely to continue for some time. An NHS Confederation survey of members identified mental health as the main concern for future care.
Funding announced since March
The government has committed substantial funding to meet the costs to the health care system associated with the pandemic. From current announcements, total DHSC spending in 2020/21 is at least £35bn more than previously budgeted, with further additional spending expected. This would be the biggest real-terms percentage increase in health spending since the NHS was founded in 1948. A lot of the additional spending is for NHS Test and Trace (£12bn) and PPE (£15bn). The other main areas of spending are for purchasing additional bed capacity through the new Nightingale ‘surge’ facilities, alongside bed and staff capacity from the independent sector. There has also been additional staffing and some capital funding to reconfigure the NHS estate for infection control and social distancing requirements.
COVID-19 funding has been provided outside the normal spending review cycle this year in response to the fast-moving nature of the pandemic. Given the ongoing uncertainty, the planned 3-year comprehensive spending review (CSR) has been postponed in favour of a 1-year review. As the previous long-term settlement only covered NHS England’s budget, this means without a multi-year spending review other critical budgets, such as workforce education and training, the public health grant to local government and the capital budget will remain without any long-term funding commitment.
In the next section we estimate how the pandemic is likely to affect the funding required by the NHS – not just next year but for the remainder of this parliament. While longer term spending decisions have been delayed, if the NHS is to effectively move from ‘rescue’ to ‘recovery’ in the face of the pandemic, funding decisions will need to be taken as soon as possible.
Estimating new funding needs
The impact of the pandemic on the NHS and health needs over the coming years is highly uncertain and there are significant gaps in the data available to model the scale and nature of this. For our work we therefore combined quantitative modelling with qualitative analysis. We drew on research and analysis undertaken by the Health Foundation and worked with the NHS Confederation, the Shelford Group and the Strategy Unit to bring together senior NHS staff – in the provider and commissioner sector, and across different service areas – to participate in workshops exploring COVID-19’s potential impact on services and costs over the longer term. Through the workshops we identified the service changes occurring due to COVID-19 and obtained reasonable assumptions for changes in demand, supply and the cost of care. These funding needs can be put into three groups:
The direct cost of COVID-19 to the health system – including for NHS Test and Trace and the extra capacity and treatment needed for COVID-19 patients.
Increased resource requirements (due to decreased productivity) across all NHS services resulting from social distancing, infection prevention and control and other changes as a result of the pandemic.
Changes in demand for care arising from the pandemic.
In the sections that follow, we outline possible scenarios facing the NHS, with analysis of how these may impact the funding needed for different parts of the service based on changes to productivity, capacity or demand. These are calculated independently of each other to illustrate the different impacts and simplify the analysis. In reality, however, services are not independent. For example, a drop-in primary care activity could lead to falls in referrals (and vice versa).
1. Direct costs of COVID-19
In the plan for jobs policy in July, a total of £31.9bn of support for the NHS and public health services was announced for 2020/21, including:
Over £15bn for PPE procurement to protect front-line staff. This is the total cost estimate for additional PPE this year for care in all settings.
£10bn for the government’s Test, Trace, Contain and Enable programme – although more recently the cost of NHS Test and Trace has been quoted as £12bn.
Over £1bn to procure additional ventilators to support the NHS.
£5.5bn of spending on health services, including the use of independent sector health facilities and supporting the safe and rapid discharge of patients from hospital who no longer need to be there.
After the plan for jobs, in late July a further £3bn in funding was announced for NHS England to prepare the NHS for the anticipated increase in demand for care over the winter. Since then, the winter economy plan included a further £16.4bn in spending as follows – though it did not confirm in which years the funds would be targeted:
a further £8.9bn of spending to support capacity and services in the NHS (this includes the £3bn referred to above)
over £5bn for vaccines, including research and development, and manufacturing
over £2bn for NHS Test and Trace (bringing the total to £12bn).
The pandemic has changed the financial pressures facing NHS England. Board papers show actual spending throughout the NHS for the first 4 months of 2020/21 was £5.1bn above planned expenditure, in part to fund additional staff costs. Given the emergence of a second wave of the pandemic, we expect this additional spending will need to be repeated for the remainder of the year, bringing the total for NHS England to at least £15bn. The NHS provider sector also committed to £1.1bn in reduced expenditure to offset other costs. If these offsets do not continue for the rest of the year, funding needs may total over £17bn for the year above the pre-COVID-19 budget (excluding PPE costs).
In total we estimate that additional spending is likely to be in the order of £47bn this year.
Ongoing COVID-19 costs in 2021/22
Based on the workshops with key stakeholders, we expect additional funding needs for 2021/22 to largely mirror those in 2020/21, although the composition of spending is likely to change. The precise scale and areas of spending is impossible to predict reliably at the moment. It will mostly depend on the COVID-19 vaccine and treatment developments, which will determine whether infection prevention and control measures can be removed or reduced. There is also little data available on the expected costs of the NHS Test and Trace programme. Even as hopes of a vaccine rise, we have assumed there will still be a significant need for PPE and NHS Test and Trace in 2021/22. We make no assumption about changes in costs to these programmes. Both are being reviewed by the NAO, where we will learn more about value for money and possible future costs. The NAO recently raised concerns over procurement during the pandemic. Given at least £27bn is being spent this year, we expect costs to remain significant going into 2021/22.
Additionally, there will be ongoing costs from treatment and support for patients experiencing long-term health impacts from COVID-19, known as long COVID. The cost of this is unknown, though NHS England has pledged £10m for dedicated clinics. These clinics could refer those in need to, for example, mental health or rehabilitation services, increasing demand for mental health and community services.
2. NHS productivity
Productivity refers to the amount of patient care that can be provided from a given set of resources – buildings, equipment, drugs and staff. Over recent years the NHS has achieved comparatively high levels of productivity growth, outpacing the rate of improvement in the wider economy.
When the government agreed the additional multi-year funding plan for NHS England in 2018, it set further ambitious targets for productivity improvement, with a requirement that the health service delivers gains of 1.1% a year for each of the 5 years of the funding settlement.
COVID-19 has led to considerable changes to productivity in the NHS. Many of the service changes introduced to manage the pandemic, as described in previous Health Foundation analysis, will make a further positive contribution to productivity growth in the future. However, across the NHS as a whole, pressures from COVID-19 are likely to have reduced productivity in the short term. Infection control and social distancing requirements will inevitably reduce productivity and introduce capacity constraints as it takes more time and resources to do the same tasks.
To explore the impact reduced productivity could have on funding pressures, we examine a series of possible scenarios with different productivity growth rates. We use the funding estimates from previous modelling by the Health Foundation and IFS for NHS England’s budget. The productivity losses are not expected to be permanent, as they are driven by the unique requirements of COVID-19 infection prevention and control and social distancing. The pandemic is therefore likely to lead to short-term falls in productivity that require increases in workforce and other capacity to meet expected demand, followed by a period to catch up and recover.
Figure 3 shows possible funding pressures based on different rates of productivity loss in the NHS. While these are significant reductions in productivity, recent estimates from the ONS show an economy-wide fall in productivity (output per hour) of 3% in Q1 2020/21 compared with 2019/20 – the largest quarterly fall on record. While a breakdown is not available for health, for all public services the fall from Q4 2019/20 to Q1 2020/21 was 13%. Given the importance of infection control in health care, productivity is likely more impacted in the NHS than areas of the economy where people can work without significant direct contact with people.
If NHS productivity falls by 15% this would increase funding pressures by up to £25bn in 2021/22. If the NHS is able to continue adapting the way it delivers care and can contain the reduction in productivity to 5%, the funding pressure would be £7bn in 2021/22. If productivity growth picks up after 2021/22 with a relaxation of infection control and social distancing, funding pressures will decrease in later years. In each scenario, productivity recovers, though not to the levels expected without the pandemic. This means by 2023/24, the funding required may be £2bn to £3bn above current funding plans for NHS England.
These scenarios reflect an average productivity loss across the sector. In reality this is likely to vary significantly across different services within the NHS. For example, parts of the NHS that can easily switch to remote service are likely to be less impacted. Robust evaluations of all services are needed to identify where patient care was improved or productivity enhanced (or declined) because of changes to service delivery.
3. Increased demand for services
Through its impacts on the population and on the delivery of health care, COVID-19 has very significantly changed the demand for NHS care. We have modelled the additional demands and spending in two areas where there are likely to be significant increases: elective care and mental health services.
Tackling the elective care backlog
Reducing elective waiting times was one of the major achievements of the NHS in England during the 2000s. But even before the pandemic the health system was struggling to keep up with demand. It has been more than 4 years since the constitution standard, that at least 92% of patients should wait no longer than 18 weeks to start elective treatment, was achieved. Prior to COVID-19, we estimated the NHS would have needed to treat more than 500,000 additional patients a year between 2020/21 and 2023/24 to meet the 18-week target.
NHS services have been seriously disrupted during the pandemic and resources diverted to treat COVID-19 patients. As a result, 4.7 million fewer patients in England were referred to consultant-led, routine care in the first 8 months of 2020 as compared with 2019. This is not because need has disappeared. Rather, it is likely to be pent-up demand caused by the interruption of services.
With the Strategy Unit we modelled the impact of this backlog of care on the size of the waiting list and waiting times. The proportion of the 4.7 million ‘missing patients’ who will be referred for treatment, and when they are referred, will depend on several factors including patients’ perceptions of the safety of services, and how likely GPs are to refer people to already stretched services. For the purposes of estimation, we have assumed that three-quarters of ‘missing patients’ will be referred by the GP for specialist care by the end of March 2021.
Table 1 shows the impact of this on the waiting list and waiting times. Without action, and assuming historical growth rates in the number of patients referred, activity and the growth in waiting list size, we estimate the waiting list could grow to 9.7 million by 2023/24 (Figure 4).
Alongside this, waiting times would increase. We estimate the median wait would increase to 18 weeks by March 2024 from 8.4 weeks in January 2020 and that by 2023/24 there would be nearly 500,000 patients who have waited for more than a year (assuming no change in prioritisation of treatment or patient behaviour that may occur). These numbers are based on activity levels being maintained, using additional resources to counter the effects of reductions in productivity.
The existing NHS England funding settlement was informed by a 2017 estimate of the cost of meeting the 18-week standard. As Figure 1 showed, almost a quarter of the additional funding for NHS England between 2018/19 and 2023/24 was for improving waiting times so that the NHS could meet the constitution standard and to stabilise NHS provider finances to reduce hospital deficits. At the start of 2019 when the NHS long term plan was published, that funding would have been sufficient to clear a backlog of 600,000 cases and increase NHS activity by an extra 170,000 treatments a year to match the flow of referrals.
We replicate our previous analysis, based on the approach taken by Rob Findlay, to estimate the additional activity needed to meet the constitution standard. We do this by calculating the size of the waiting list at the end of 2023/24 that is consistent with a waiting time of 18 weeks. This is the manageable waiting list size. Starting in April 2021, achieving this would require clearing a backlog of 4.5 million cases by 2023/24. In addition, an extra 380,000 procedures a year would be needed to match the flow of new referrals.
However, it is not only the increase in funding that makes this challenging. To meet this increased activity, the Strategy Unit estimate there would need to be a 12% increase in capacity, equating to 5,000 additional beds, 4,100 consultants, 17,100 nurses and more than 28,000 MRIs. The independent sector may be able to contribute, but it is nonetheless difficult to see an increase in staff and equipment on this scale being possible within 3 years.
These challenges would be reduced by doubling, to 6 years, the time taken to return waiting times to the 18-week standard. The target date would then be March 2027; achieving this would require a 7% increase in activity over the long term plan assumptions, at a cost of £0.9bn a year.
New demand for mental health services
The pandemic and the subsequent response have taken a toll on the mental health and wellbeing of the population. According to ONS annual population surveys of wellbeing and, more recently, from the ONS Opinions and Lifestyle Survey, anxiety is far higher than at any other point in the past decade. Demand for mental health services is expected to rise over the next 3 years.
With the Strategy Unit, we have modelled the impact on demand. The approach is grounded in recent research showing an increase in levels of mental distress during the early stages of the pandemic, as well as higher levels of anxiety and lower wellbeing, especially among young people. The pandemic and response have had a range of consequences that could affect mental health (shown in Table 3).
Based on these, the population at risk is identified and the likely consequences on demand for mental health services estimated. We focus on a scenario that sees spikes in demand over time, getting smaller as we move away from the first wave of the pandemic. Under these assumptions, we find there could be 721,000 new referrals for dedicated mental health services in 2020/21 due to COVID-19, 669,000 additional referrals in 2021/22 and 388,000 in 2022/23. Over the course of 3 years, we project that COVID-19 could lead to an additional 1.8 million referrals to mental health services. This is likely to be an underestimate as it does not include demand arising from any future increases in unemployment and economic hardship, resulting from the pandemic.
The increase in demand differs by mental health service. Primary care mental health services, including Improving Access to Psychological Therapies (IAPT) and primary care mental health teams, account for an additional 935,000 referrals, just over half of the total increase (53%) (Figure 6). Although specialist inpatient admissions account for very little of the increase in referrals, they are far and away the most expensive single form of care.
We estimate that meeting this level of increased demand could require an average annual funding increase of £1.1–1.4bn per year (Table 4). This is over and above existing funding for mental health services, which were already under strain. It is also worth noting that the new demand is not simply a greater number of cases. It is likely that delayed care has also contributed to increased severity of cases, which may further impact both capacity and productivity. Furthermore, increased mental health demands will also increase pressure on general services such as GPs, NHS 111 and 999.
Non-NHS health budgets
In recent years the capital budget has faced many cuts, caused by repeated transfers to the revenue budget, totalling over £5bn. This has left the NHS with a rising maintenance backlog that currently stands at over £6.7bn.
This year there has been a significant step increase in capital spending and the overall DHSC budget is now expected to be almost £10bn in 2020/21, roughly double real-terms spending in 2016/17 (Figure 7). This increase is a combination of overall commitments to increase the budget, some capital spending in later years being brought forward, and COVID-19-related costs. The capital budget for 2021/22 will be set in the Spending Review.
The NHS has historically been a low capital spender, at almost half the rate (as a share of GDP) of spending in comparable countries. The 2020/21 capital budget is likely to bring the NHS up to the levels of capital investment in these countries. Modernising the NHS’s estate and ensuring it has enough equipment will take many years of capital investment. The government recognised that there needs to be a long-term planning horizon for capital with the Health Infrastructure Plan. The government had previously pledged for a multi-year capital settlement at the CSR.
For diagnostics, we have previously estimated that it would take approximately £1.5bn to bring England up to the OECD average for MRI and CT scanners, though this cost would vary significantly depending on whether new facilities need to be built to accommodate the scanners. There are concerns over the age of NHS equipment, suggesting the capacity replaced, as well as increased. Investing in diagnostics is critical to reducing the growing elective care backlog, described above.
For mental health, the government has pledged to remove dormitory style facilities, with funding of £400m over the next 4 years. This is in addition to £250m announced earlier in the year. The Royal College of Psychiatrists recently called for a substantial increase in capital funding for mental health, with a total investment of £4.4bn over the next 4 years. This would include addressing critical maintenance and modernising the estate.
The government has also pledged to build 40 hospitals. £2.8bn in funding was originally announced with the Health Infrastructure Plan, and recently another £3.7bn announced to deliver a total of 48 hospitals by 2030. Many of the projects are rebuilds, raising questions about whether these hospitals will increase capacity in the NHS. Based on average hospitals costs, this pledge could cost around £18bn, so with only £6.5bn of funding currently pledged, more will clearly be required.
The majority of the funding appears to be for acute hospitals. In our workshops, stakeholders noted that the ability of the NHS to move more care away from the acute setting will require significant capital investment outside hospitals. A hospital building plan alone is not therefore sufficient and a wider NHS capital investment programme is needed. Increased capital investment, including in infrastructure, will be important in efforts to increase productivity in the NHS.
The capital budget will need to increase above 2020/21 levels given the significant hospital commitments, the need for capital investment and the expected growth in NHS activity. If it does not then an increasing proportion of the budget will be devoted to the hospitals pledge, with little to address the many capital issues across the NHS and to transform care outside hospitals. Figure 7 shows recent trends in the capital budget, along with an estimate of the budget if it were to grow by 3.1% in real terms – the current NHS England revenue growth rate – reaching £10.5bn in 2023/24. But given the need for investment in primary care and community services, mental health, the manifesto commitments and to address existing issues in hospitals, a budget of £10.5bn is likely to be the minimum needed. Most critically, this will need to be sustained and spent on investment – ensuring that there is no repeat of the transfers from capital to meet day-to-day running cost pressures.
With significant concern over capacity in the NHS, there will need to be an evaluation of how much of the budget should be for upgrading facilities across the service, and how much will be needed to address capacity issues going forward.
Public health spending
Public health funding has been significantly cut since 2015/16, with a real-terms fall of 19%, or 22% per head of population. The consequences of a failure over several years to properly invest in public health have been clearly exposed during the pandemic.
The pandemic has highlighted the role played by wider determinants of health and has again made stark the health inequalities that exist. It has underlined the importance of prevention, for example, in tackling obesity. Public health support will be vital for dealing with the consequences of the pandemic and worsening economic conditions.
All of these point to the need for greater investment in public health, starting with a reversal of the cuts to the grant. Increased funding for the NHS should not be at the expense of longer term investment in public health and prevention.
In the wake of PHE’s abolition, the design of a new public health system needs to ensure that the non-health protection functions of PHE – which support good health – are retained and the cuts these functions have faced are reversed.
Workforce education and training
Workforce will remain a key challenge for the NHS. Staff burnout, which may worsen through the second wave is a major concern. Any reductions in productivity will mean a larger workforce is required to deliver the same amount of care. Nursing remains the key area of workforce shortages in the NHS, with registered nursing full-time equivalent vacancies in June 2020 amounting to nearly 38,000 (45% of all NHS hospital and community health service vacancies in England alone, up from 40% in June 2019). Our analysis suggests that the government’s target of hiring 50,000 additional nurses by 2024/25 is only achievable in a ‘best case’ world. This includes sustained policy action to provide financial support to student nurses, reduce attrition, improve retention and, in the short term, maintain substantial levels of international recruitment.
HEE is clearly key when it comes to boosting domestic workforce training. HEE’s budget has only been set for 2020/21, with the 1-year Spending Review to confirm it for another year. The 2019 Spending Round allocated £150m to HEE in 2020/21 to fund continued professional development (CPD) for nurses and other professions. In March 2020, HEE was still awaiting formal confirmation of this funding from DHSC. We estimate it would cost between £200m and £520m to maintain this policy to 2023/24.
HEE also has access to funding for up to 5,000 additional clinical nursing placements up to 2020/21. In August 2020, HEE announced it would invest £15m towards this end through its Clinical Placement Expansion Programme.
Overall, we estimate that the HEE budget will need to increase by £580m to £900m from 2019/20 to 2023/24 to allow for increased spending on workforce development, clinical placement expansion, CPD, additional funding for student nurse and GP training (especially for the cancer and mental health workforces) and international recruitment.
Total spending pressures
Table 5 summarises the potential spending pressures on the DHSC budget to 2023/24. The pressures relate to those we have outlined or modelled in the previous sections and are not an exhaustive list. Discussions in the workshops raised concerns over future demand for cancer services, which have experienced disruptions to care. Additionally, there are concerns for community care, and possible additional demands to primary care from any potential vaccine rollout.
We expect pressures for 2021/22 to be the greatest over the next three years, as there will be significant direct and indirect costs from the management of COVID-19. Because of the high degree of uncertainty, we have not projected COVID-19 costs after 2021/22. However, even in the event of a highly effective vaccine, we would still expect COVID-19 to have costs, including for administration of a vaccine. Additional funding pressures will need to be reassessed and will largely be determined by the success of any vaccine and therapeutics.
For NHS England, the spending pressures in the table are increases over the long term plan funding. For public health and capital, the pressures are over the expected 2020/21 spend, assumed to be £9.6bn for capital. For workforce training, these are pressures over the 2019/20 budget of £5.1bn. The 2020/21 outturn is expected to be around £0.5bn more than the 2019/20 budget.
The legacy of COVID-19 will stretch into next year and beyond. Delivering the long term plan will require additional funding for NHS England of up to £10bn next year, reducing to £5bn in 2023/24.
The challenges ahead
Maintaining standards of care in a time of increased demand and lower productivity will mean the NHS will require more funding for a larger workforce. We have significant concerns about how much of the necessary workforce expansion can occur in the short or medium term. Staff numbers increased significantly this year (the latest NHS Digital data show a 6% increase in full-time equivalent hospital staff in England in the year to July 2020), but further investment is needed in HEE to recruit and retain staff. Concerns over staff wellbeing will also continue in the event of future waves of COVID-19 and as services become even more stretched.
It is clear the NHS faces the most difficult years since its inception. The pandemic is ongoing, and the NHS is likely to continue treating large numbers of COVID-19 patients during the winter. Given the system was operating with limited spare capacity pre-COVID-19, the more COVID-19 patients there are being treated, the more the NHS will struggle to deliver all services without further increases in waiting times. This could also lead to significant variations in care across the country if the spread of COVID-19 varies.
Policymakers should be open and honest about the challenges ahead. The NHS entered the pandemic with fewer doctors, nurses, beds and diagnostic equipment than comparable countries. Difficult decisions about how best to make use of the NHS’s resources will need to be made transparently, so the public is clear about what to expect. These decisions could include, for example, changes to the order in which people waiting for NHS treatment are seen or the extent mental health services grow compared with other services, such as planned surgery. It is clear the NHS will need more funding, a larger workforce and increased physical capacity. While we cannot forecast the exact funding needs of each part of the service, the government should start to take immediate action to increase funding and capacity in critical areas, beginning with the workforce.
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