Spending Review 2020
Priorities for the NHS, social care and the nation’s health
Spending Review 2020
24 November 2020
About 22 mins to read

Key points
- The government has opted for a 1-year Spending Review because of the scale of the coronavirus (COVID-19) pandemic and its unknown impact on future public finances. The Spending Review will now focus on ‘COVID-19 and supporting jobs’, with multi-year resource settlements only for the NHS, schools, and priority infrastructure projects.
- Emergency spending will need to continue for 2021/22 and the focus of the Spending Review is understandably short term. It is essential that the government meets the costs of COVID-19 for public services in full. These will still be significant next year and remain uncertain: we estimate the total direct costs for the health system alone could be around £27bn. But the government must also attend to the longer term need for investment in people’s health, and wider reform to NHS and social care services.
- NHS services must be supported to recover, but also enabled to deliver the essential improvements set out in the NHS long term plan. This will be hard as the costs of recovery will be significant. Recovery includes meeting new or exacerbated health needs, particularly rising rates of mental ill-health, which will require an average of £1.1–1.4bn extra each year. Tackling the backlog of demand for elective care and restoring waiting times standards by 2023/24 would cost an extra £1.9bn in each of the next 3 years. However, this represents an 11% uplift in activity and is not feasible given staffing constraints. Achieving this by 2026/27, at a cost of £0.9bn a year, would be more realistic.
- In addition to these demand pressures, social distancing and infection control measures will reduce what the NHS can deliver for the given level of funding. Assuming productivity in 2021/22 is 5% lower than pre-pandemic expectations, the additional costs involved in delivering care would be £7bn next year, falling to an additional £3bn by 2023/24.
- Delivering the long term plan will also need capital investment across all services, not just acute hospitals, and will need to rise in line with other NHS spending to £10.5bn by 2023/24. The ability of the NHS to recover from COVID-19 and deliver the long term plan also depends on increasing the NHS workforce. Investment to train more nurses, doctors and other health care professionals cannot wait and must be sustained over the long term. This will require additional spending over the 2019/20 budget of £600m next year, rising to £900m by 2023/24.
- For adult social care, care providers and local authorities need investment to stabilise services and improve pay and conditions for staff. But the case for reform is also widely recognised. The public needs fairer access and greater social protection for those who develop high social care needs. £11bn a year by 2023/24 would be needed to do this, assuming the implementation of a £46,000 cap on care costs.
- Other areas of government spending require further investment to minimise the detrimental health impacts of the pandemic. The government’s emergency funding to preserve jobs should continue, given the strength of the link between employment and good health. But the government will also need to take decisive steps to improve health, starting with the £1bn to restore the public health system to 2015 levels (£0.9bn for the public health grant and £55m for the non-health protection functions of Public Health England) and a further £2.5bn by 2023/24 to ‘level up’ funding across local areas.
- The bigger goal will be the creation of policies and investment to improve health over the longer term, targeted at the most disadvantaged areas. This requires a sustained reversal of local government spending cuts, particularly in early years services, and sustained investment in the areas that contribute to health, from transport to housing and the creation of higher quality jobs.
- The costs are daunting. For the health system alone the additional funding pressures in 2021/22 amount to £40bn or 2% of GDP pre-COVID, and £10bn – around 0.5% of GDP – by 2023/24. The short-term costs of the pandemic have pushed up public borrowing on a huge scale, taking the UK’s debt to GDP ratio above 100%. Government must resist the temptation to reduce the debt by cutting non-NHS services in the future and underfunding the NHS and social care. In the medium term this can only be achieved through a higher tax to GDP ratio. The timing of tax decisions will depend on the recovery of the economy, but without raising taxes, there is a risk of permanent underfunding. This would leave services destined only to respond to acute needs, unable to prevent ill-health or enable healthier lives.
Further reading
Spending Review 2020
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