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.  
 

Introduction

On 21 October 2020, the government announced it was abandoning plans to conduct a multi-year Spending Review in favour of a 1-year review to set budgets for government departments for 2021/22 only. The rationale for this shift was the continuing uncertainty created by the pandemic. The Chancellor stated that the Spending Review will ‘focus entirely on fighting COVID-19 and supporting jobs’, with multi-year resource settlements ‘fully funded’ only for the NHS, schools, and ‘priority infrastructure projects’.

Since the announcement, a further national lockdown has been imposed by government, which will increase the costs of fighting the pandemic. The direct costs of doing so have already been substantial. In July, the government confirmed allocation of an additional £31.9bn to health and social care in 2020/21, expanded by a further £16.4bn in September. This includes £15bn on personal protective equipment (PPE), and a total of £12bn on NHS Test and Trace, £1bn for ventilators and £10.5bn on other health spending including the use of the independent sector and vaccine development. Other costs will arise as the pandemic and policy response continues to evolve – for example, as a result of the large scale distribution and administration of a potential vaccine.

There has also been an estimated £100bn to help ameliorate the economic impacts of the pandemic response – such as the effect of lockdown on jobs and incomes. This includes support for workers through the Coronavirus Job Retention Scheme (JRS) and Self-Employed Income Support Scheme, loans and grants to businesses and a temporary boost of £20 a week through Universal Credit and tax credits for lower income families. This total is set to increase again after the second national lockdown with the JRS now extended to March 2021.

The trajectory of these costs is unclear. It is also uncertain how deep the economic downturn will be, and what additional impact Brexit will have. As a result, the Institute for Fiscal Studies concluded that this makes it ‘extremely difficult – and arguably unwise – to set supposedly fixed, multi-year, multi-billion-pound spending plans at this moment in time’.

So, the government’s decision to focus on the immediate spending challenges is understandable. But the absence of long-term funding commitments leaves many government policies to improve health and care in limbo. These include pledges to ‘level up’ economic opportunities across the country after a decade of austerity, reform social care funding, and improve NHS services in England in line with the NHS long term plan – as well as the delivery of manifesto pledges on workforce capacity and capital.

Recovery from COVID-19 is paramount, but longer term priorities must be kept in sight. The longer term matters for at least two reasons. First, some of the decisions taken now may come into conflict with longer-term goals. For example, investment to boost hospital capacity must not be at the expense of increased investment in primary and community services, while a 1-year horizon will make it tempting, yet again, to avoid social care funding reform.

Second, as we will show, the scale of the investment needed longer term is enormous: to lay the foundations for healthier lives for everyone, a just and effective social care system and an NHS that can prevent ill health as well as manage acute illness. This creates a conflict between what is needed and the government’s stated approach to debt and borrowing levels. It is important that government does not avert its gaze from this: a debate is needed sooner rather than later about the sustainability of broader public finances.

In this long read we set out the main priorities for the NHS, social care and policies to improve health over the medium and longer term. We assess the impact that COVID-19 has had and, where feasible, offer estimates of the amounts needed to meet these priorities in 2021/22, and in some cases to 2023/24.

 

Shore up the NHS against COVID-19 while investing in the long term plan

When the pandemic struck, NHS England had begun the second year of implementing the NHS long term plan, underpinned by a 5-year funding settlement announced in 2018. The long term plan aims to improve outcomes and reduce health inequalities through better prevention and integration of services, and by directing additional funding to priority services such as mental health, cancer and primary care.

The funding settlement was for an average real-terms increase of 3.3% per year – below the long-term average of 3.7%, but significantly higher than the 2.3% received between 2013/14 and 2018/19. Not all the funding was put in place in 2018: this year’s Spending Review was expected to set out detail of essential longer term investment beyond 2020/21 in the workforce, public health and capital.  

For NHS services, even before COVID-19 additional funding was going to be needed to deliver the long term plan in full. In 2019, we calculated that the plan required acute hospital activity to grow at a rate of no more than 2.3% a year, well below the historical rate of 3.0% average per year between 2010/11 and 2016/17. A growing waiting list and steady decline in performance against waiting times standards before 2020 show that the system was struggling to moderate this growth.  

The arrival of COVID-19 delivered a major blow to the NHS. It has caused a significant slowdown in routine care, increased waiting times and expanded the backlog of people needing treatment. It is likely to have raised demand, including for mental health services. Addressing these will require additional funding in the medium to longer term. Substantial and sustained funding will also be needed for the workforce and for capital. Without this, there is a risk that the reform set out in the long term plan will not happen, locking the NHS into an increasingly crisis-prone state.

Below, we set out estimates of what will be needed to reduce waiting times, respond to new demand, and for the workforce and capital. Further analysis and assumptions behind these estimates is available in Managing uncertainty: COVID-19 and the NHS long term plan.  

Restoring services

Direct costs, for NHS Test and Trace and for vaccines, will continue next year: we estimate a further £27bn may be needed in 2021/22. But the largest impact of COVID-19 on NHS services has been indirect and will be longer lasting. In common with many health systems, much non-urgent routine care was paused to release capacity and safely provide care for a surge in people acutely ill with COVID-19. In the case of the NHS, this resulted in cancelled and postponed care, as well as a slowdown in new referrals. New referrals have begun to recover but COVID-19 has reduced productivity. Infection control and social distancing mean that more time and resources are needed to complete the same tasks. It is not yet clear how much this may be offset by the rapid adoption of remote and digital services.

The result is a growing backlog of care and reduced capacity to deliver that care: both need addressing if the long term plan is not to be derailed. Since January 2020, 4.7 million fewer patients were referred for consultant-led, routine hospital care compared with the same months in 2019. We have modelled the impact of these ‘missing’ patients returning. Assuming that 75% still need treatment and are referred by the end of 2020/21, the waiting list would grow to 9.7 million by 2023. Clearing this backlog over 3 years, while treating the expected normal growth in referrals by 2023/24, would require treating 1.5 million more patients a year beyond the long term plan assumptions, at an additional cost of £1.9bn per year.

Compared with the long term plan assumptions, this represents an annual average 11% increase in the number of elective procedures the NHS performs each year requiring some 4,000 extra consultants and 17,000 extra nurses a year. Given the staffing shortages, the time it takes to recruit, and the challenges of retaining staff, this is not feasible. Setting a 6-year goal for clearing the backlog and restoring waiting times would be more realistic. To return to 18-week waiting times by 2026/27, NHS England would require an additional £900m on top of the current spending plans in 2023/24, the last year of this parliament. 

This assumes that the NHS returns to expected levels of productivity. But it is not yet clear how much productivity has been affected by COVID-19, and the impact will be uneven depending on whether services have found ways to function remotely at scale. We expect that COVID-19 will cast a long shadow. Even with an optimistic scenario of a 5% reduction in productivity in 2021/22, compared with expected productivity improvement the overall cost could be £7bn next year. Even if productivity quickly increases after that, there could still be an additional cost of £3bn in 2023/24.

Meeting new demand

The pandemic has also increased demand, most obviously for those needing care for COVID-19 itself and some non-COVID-19 patients whose care was delayed and may now need more intensive treatment. Pressures have increased on primary care, as patients are managed by their GPs while they await treatment.   

One sector of particular concern is mental health. Levels of reported anxiety remain persistently above pre-pandemic levels, driven by a range of factors from economic hardship to loneliness and isolation. Over the next 3 years, we project referrals to dedicated mental health services for adults and children could increase by an average of 11%. We estimate that meeting this level of increased demand could require an average annual increase of £1.1–1.4bn per year. This is over and above existing funding for mental health services, which were already under strain, and it does not take into account the impact on general practice.

Workforce

Recovery from COVID-19 and restoring progress towards the long term plan will need investment in staff. The nursing workforce is a particular concern. In England, the outbreak of COVID-19 occurred against a backdrop of low levels of staffing by comparable international standards and significant workforce shortages, with the NHS reliant on international recruitment to bridge the gap. The government also promised 50,000 additional nurses by 2024/25 in the 2019 general election.

The workforce has increased significantly in 2020 in response to COVID-19. The latest NHS Digital data show that overall NHS England full-time equivalent staff numbers increased by 6% in the year to July 2020 (to reach 1.17 million). The number of full-time equivalent nurses and health visitors also rose by 5% to reach 301,836. But these numbers may include temporary returnees to the workforce and may not be sustained.

The government must signal clearly that it is committed, for the rest of this parliament, to maintaining the expansion in nursing, allied health professional and medical undergraduate places that began in 2020. UCAS data show 5,000 more people started undergraduate nursing degrees in 2020 than in 2019 (an increase of 23%). The number of students starting degrees in medicine, dentistry and allied subjects has also increased by 9,710 relative to 2019.

But funding for education and training was not part of the 2018 multi-year settlement for front-line health services. The NHS and universities need clarity in order to put sufficient, high-quality training capacity in place. Overall, we estimate that the Health Education England budget will need to increase by between £580m and £900m from 2019/20 to 2023/24. This is to account for increased spending on workforce development, clinical placement expansion, CPD, additional funding for nurse and GP training (especially for the cancer and mental health workforces) and international recruitment.

Capital

The capital budget is used to finance long-term investment in the NHS, such as new buildings, equipment and technology. It is part of overall DHSC spending and has faced many years of real-terms cuts, leaving the NHS with a maintenance backlog currently standing at over £6.75bn. Spending on capital in 2016/17 was roughly half of that in comparable countries. The inadequacy of the capital budget has been recognised and capital spend in 2020/21 is expected to be £9.6bn, a substantial increase on recent years. Some of the 2019/20 budget is expected to be COVID-19-related spend, such as necessary reconfigurations in hospitals.

There has been much publicity about the capital investment that will be needed to deliver the government’s manifesto pledge to build 40 ‘new hospitals’. £2.8bn was originally announced with the Health Infrastructure Plan, which included funding for six hospitals to be delivered by 2025 and funding to develop plans for another 34 hospitals. Another £3.7bn was announced in October for the 40 hospitals by 2030, plus an open competition for a further eight hospitals. The cost of 40 new hospitals has been estimated at around £18bn: far in excess of the £6.5bn sum announced so far.

But there needs to be further significant capital investment over the next few years to deliver the improvements to services, such as mental health or cancer, set out in the long term plan. For example, capital investment will be needed to fund recommendations in the recent review of diagnostic services, which included doubling the number of CT scanners and setting up community diagnostic hubs. These would require substantial investment, along with an estimated additional 2,000 radiographers and 4,000 radiologists.

Capital investment is also needed in mental health. The Royal College of Psychiatrists has called for a total investment of £4.4bn over the next 4 years. This would be an increase of £3.34bn (on top of current day-to-day capital budgets) for critical maintenance, necessary COVID-19 spending and modernising the estate, including 12 new mental health facilities.

The long term plan will also need better facilities in primary care and community services. Taken together, these investments outside acute hospitals imply sustained investment. Therefore, we estimate that the magnitude of the 2020/21 capital budget will need to be sustained and expanded, rising to £10.5bn by 2023/24.

 

Make the adult social care system fairer and more sustainable

COVID-19 has taken a heavy toll on people using social care and those who provide care. Policy action to protect social care services during the first wave of the pandemic was too slow and too limited. Emergency funding was made available by government: £800m for infection control, £1.3bn to provide care for people on discharge from hospital and £3.2bn for overall local government support including for social care. But by June 2020, nearly 40,000 excess deaths (additional deaths for this period compared to those normally expected) had occurred in care homes and among those receiving care at home.

COVID-19 hit a system already weakened by funding shortages. Public spending per person has fallen in real terms over the past decade, while the number of people needing care has risen. Growing numbers of younger and older adults go without the care they need.

The decline in public spending has also increasingly put care providers under pressure, some of which are at risk of collapse. This pressure not only affects the quality of care that can be delivered but is also detrimental to the people providing it. Staff turnover is high, many staff are on low pay, and a quarter are on zero-hours contracts. Nearly 90% of care workers in the sector – mostly women – were paid below the ‘real’ living wage in March 2020. Workforce shortages in social care stood at around 122,000 before the pandemic.

The fundamental unfairness of the adult social care system in England has not been fixed. Under the current system, people with assets above £23,250 must pay for their own social care, but these costs are highly uncertain and there is no way for people to insure themselves against them. Boris Johnson promised to fix this aspect of social care ‘once and for all’ in his first speech as Prime Minister – and restated this commitment as the country emerged from the first wave of COVID-19. But so far, no plan has been forthcoming.

Based on our recent analysis of long-term spending options, we argue that there are two main priorities for government investment and reform.

Stabilise and broaden access to the current system

Additional spending is needed to stabilise the existing social care system. This needs to go beyond the £2.1bn we have calculated will be needed per year by 2023/24 to meet the growing demand for care from an ageing population. This sum will do nothing to increase the number of people able to access publicly funded social care, nor will it stabilise the thousands of social care providers or result in better wages for the hundreds of thousands who work in them.

To stabilise and improve the current system, our analysis suggests that an additional £7.7bn per year is needed by 2023/24 to allow for a 10% increase in care packages (equivalent to long-term care packages for approximately 100,000 people). At the same time, this sum would give local government the ability to pay for higher costs per person in home care, residential and nursing care. These costs have been derived from the home care sector and analysis by the Competition and Markets Authority, and represent amounts that would allow providers to improve the pay and conditions of their staff, and deliver higher quality care. 

Reform funding to provide greater protection against care costs

Improving and expanding services needs to happen alongside greater protection for people against social care costs. The current system is a threadbare safety net – with publicly funded care only available to people with the highest needs and lowest means.

Government has choices about how to do this. Options include providing universal and comprehensive social care services (like the NHS), providing some basic care services for everyone (such as ‘free personal care’ in Scotland), or introducing a cap on the total costs of care for people with the greatest and most expensive care needs (such as the capped cost model proposed by the Dilnot Commission in 2011).

One advantage of a capped cost model is that it already lies on the statute book, so could be activated by government relatively easily. The capped cost model could also be used flexibly by government, depending on its spending priorities and choices about the balance of responsibility between individuals and the state.

Table 1 sets out cost estimates for the different levels of the cap on social care costs. The lower the cap, the greater the protection for individuals but the greater the cost to government. A cap of £46,000, as recommended by the Dilnot Commission (in today’s money), would mean that a person entering a care home would – if they had sufficient resources – pay for the first 2 years of their stay, with the state paying after that. This would cost around £3.1bn in 2023/24.

Table 1: Estimates of the costs for different levels of the cap
Cap level Cost in 2023/24
£0 (ie the state pays all care costs) £8.0bn
£25,000 £4.6bn
£46,000 £3.1bn
£78,000 £2.1bn

Taken together the annual costs of a package to stabilise the sector, improve access and implement funding reform is estimated to cost an additional £11bn in 2023/24. A 1-year Spending Review should make a down payment on this funding requirement of £6.1bn in 2021/22. Any additional investment to stabilise the sector will need wider policy interventions to ensure additional funding makes its way to the front line; for example, a minimum wage for social care, or sectoral wage boards. A full list of what it might cost to stabilise and improve adult social care in England under different scenarios is outlined in our analysis.

As with the NHS, in 2021/22 spending on continuing COVID-19 emergency funding to the social care sector will be needed on top of this – for example, for PPE and infection control, alongside support for providers and local authorities to keep social care users and staff safe.

 

Strengthen the public health infrastructure

A healthy population is one of any nation’s most important assets and the foundation for a prosperous society and economy. However, even before the pandemic there were clear signs for concern about the nation’s health. Improvements in life expectancy had stalled and inequalities in healthy life expectancy were widening. The pandemic has brought these issues into sharper focus: the mortality rate for people living in the most deprived 10% of local areas has been twice that of those living in the least deprived 10% of local areas. Policies aimed at controlling the spread of COVID-19 also have a greater negative impact on more vulnerable population groups. The need for investment in the things that make us healthy and the value of a strong public health system have never been clearer.

A core component of government support to help tackle poorer health outcomes is the public health grant. It is provided to local government for a range of services including sexual health, stopping smoking, tackling obesity and children’s services for under fives (which includes health visitors).

Since 2015/16 public health real-terms funding per head has fallen by 22%, despite recognition 2 years earlier that a greater than real-terms rise in spending would be needed in future years. Over the same period, spending on the NHS increased, even though there is evidence that the returns on further public health spending are greater than those on further health care spending.

In March 2020, the government reversed the trend of successive years of real-terms cuts, increasing the grant for 2020/21, but only by £80m. That reversed only a fraction of the overall cuts made since 2015/16. Restoring real-terms per capita spending to the same levels as 2015/16 would require the equivalent of an additional £0.9bn a year. For 2021/22, an increase above this level to the public health grant would help provide additional emergency support to offset the negative health impacts caused by higher unemployment, increased poverty and social restrictions. It would also accelerate the long-term restoration of the grant.

But even this increase would not ensure that the grant is allocated to local authorities in a way that best meets need, without making some areas worse off than they are now. Levelling up public health grant allocations, by taking account of local need for different public health services and demographics (in line with the formula developed by the Advisory Committee for Resource Allocation), would require an additional £2.5bn a year (in 2020/21 prices) as the longer term funding goal for 2023/24.

Mid-pandemic, the government decided to abolish Public Health England – the agency tasked with improving population health, reducing health inequalities and protecting the public from hazards including public health emergencies. It will be replaced by the new National Institute for Health Protection, which will receive around 40% of PHE’s budget. The new institute will not be responsible for health improvement, but these functions and their funding – currently £180m a year – must not be lost in the reforms. A resilient public health system will be crucial to safeguard the nation’s health in the recovery phase of the pandemic. Even though improvements in life expectancy stalled in the middle of the past decade, the health improvement functions of PHE were cut by 22% in real terms. As a minimum that funding should be restored to bring total funding up to £235m a year to support those functions.

Investing in the wider determinants of health

Maintaining and improving our health is not achieved solely through preventative public health interventions. The greatest influences on our health are the conditions in which we live, work and grow up. The past decade of austerity has led to a significant erosion in many of the services that shape health, including early years services, education, as well as funding for local government. Details are still lacking on how exactly the government plans to level up and turn the page on austerity, but sustained improvements in the population’s health will require wider, longer term investments.

A commitment to increase school budgets by £4.6bn in real terms by 2022/23 was first made in the September 2019 Spending Round – but only a 1-year settlement for most other areas of public spending. However, the scope for additional funding over the rest of the parliament for other parts of public spending may be limited by the multi-year settlements for the NHS, education and, potentially, defence.

Areas such as early years services are vital for maintaining and improving health but lack longer term funding plans. Funding for Sure Start – shown to provide health benefits for children and mothers as well as leading to reductions in health care spend – has been reduced by two-thirds from £1.8bn in 2009/10 to £600m in 2017/18.

Local government has also experienced significant cuts since 2010/11, with a reduction in spending power of 28.6% and a reduction in spending on services of 14.7% between 2010/11 and 2017/18. The majority of additional funding for local authorities – largely through increases in council tax revenue – has been to help with the costs of adult social care, which represented 43.4% of non-education spending by local authorities in 2017/18. The overall settlement for local government must enable it to stabilise and reform social care, but also restore a full range of services spanning education, libraries, transport and planning, all of which support the population’s health.

Another priority area is social security, which must provide more than a basic safety net and ensure an adequate standard of living. The continuation of the pre-COVID-19 policy (and income) position is expected to result in child poverty rising in this and future years. The overall volume of social security falls outside the Spending Review (which sets departmental spending); nonetheless, such spending forms part of the overall government envelope. Making the temporary boosts to support during the pandemic permanent would be an important start – such as the £20 a week boost to tax credit and Universal Credit and the increase in the Local Housing Allowance to 30% of local rents (which costs around £8bn a year).

 

Next year and beyond: building back healthier from COVID-19

The priority for spending in 2021/22 is to minimise the immediate direct and indirect harms from COVID-19 and manage the pandemic so that the economy and people’s lives can begin to recover. The second priority will be to map a path to recovery that delivers on the government’s election pledges (on the NHS, social care, levelling up the country), but if the government sees the nation’s health as a priority, this should be a genuine goal of public spending.

For the NHS and social care, this means making sure that services have the resources they need to deal with COVID-19 and minimise the impact on mortality and people’s health. The direct costs of COVID-19 for public services should be dealt with separately, as a reserve, and not included within baseline budgets as these are subject to such uncertainty.

The NHS

By now, the NHS should have been well down the road of implementing the NHS long term plan, but the arrival of the pandemic has blown these reforms significantly off course. Making up this lost ground is essential. But, as we have shown, it will be difficult and costly to recover from reduced productivity and the consequences of disruption to non-COVID-19 treatment for millions of people. Returning waiting times to pre-COVID levels, given rising demand and reduced productivity, will require significant investment and may still be very hard to achieve in the short or even medium term. Dealing with the pressures from extra demand and lower productivity will require a larger workforce, and the wellbeing of current staff is at risk given the potential for future waves of COVID-19 and as services become even more stretched.

Recovery from COVID-19 could threaten the delivery of the long term plan unless there are significantly more resources allocated for people, equipment and facilities, above and beyond what is needed for reducing waiting lists and offsetting lost productivity. In terms of workforce this means investing to support a continued expansion in the number of nurses, doctors and wider health care professionals in training. On capital, while the government has made much of its commitment to upgrading hospitals, this should not be at the expense of investment in mental health facilities, diagnostics and primary care, without which some long term plan ambitions – such as earlier cancer diagnosis and better management of illness in the community – will not happen. The COVID-19 pandemic has also raised bigger questions about the capacity and resilience of the NHS to deal with shocks. Although the additional capital investment would improve this incrementally, a more fundamental review of physical capacity is needed.

If the government decides not to fully fund the NHS to restore progress towards the long term plan, it should understand the potential consequences of this decision and articulate realistic priorities for what the NHS should aim to achieve. Without this there is a risk that resources flow towards the acute hospital sector, away from less visible but pressing problems such as increased mental health needs.

Adult social care

While the NHS has a long term plan, social care does not. Here, the main risk of a 1-year Spending Review is the temptation to further delay reform until the public finances are more secure. But those working in social care deserve better pay and conditions, social care providers and local authorities need urgent investment to improve services, and the public deserves a fairer and more generous system.

Announcing the need for a second lockdown, the Prime Minister raised the prospect of an essential service – the NHS – having to ‘turn people away’ if the suggested measures were not taken. But the financial thresholds of the current social care system mean that people are routinely turned away from an essential service and required to support themselves. The opportunity to find a fairer split between public and private funding in social care must not be lost.

A healthier society

Expanding the public health grant and ensuring adequate funding for the health improvement functions after PHE is abolished is essential. But the biggest goal of all would be to grasp the reality of building a healthier society and take a firm step towards addressing the root causes of ill-health.  

The government’s action to support jobs has been vital, described by the IMF as ‘one of the best examples of coordinated action globally’. Given the link between employment and health, the decision to continue the various forms of emergency support for business and jobs will help support living standards through the pandemic. The stop-start nature of lockdowns makes this difficult, but support through the benefit system must be maintained, the now reinstated JRS should not be ended too quickly, and new help developed for those currently without support suffering a drop in living standards.

But the government must also plan for life beyond the pandemic. This means practical help for people to find employment, and training to enable access to better quality jobs. Priority should be given to young people, who so far have experienced the highest unemployment rates (and are at greater risk of unemployment as the economic crisis unfolds), and those who are experiencing extended periods of reduced income because of unemployment or reduced hours of work.

The sectoral nature of the economic damage from COVID-19 means that it will also be important to focus support in areas with a large share of jobs from the most affected sectors. Preventing high rates of long-term unemployment will reduce poorer health outcomes in those areas and avoid widening health inequalities.

A cross-government health inequalities strategy should be established as a matter of urgency, to guide decisions about investment in areas including early years services, housing and welfare. The previous decade of austerity led to a drift away from spending on preventative services (such as Sure Start) to reactive services for looked-after children as shown in our analysis. A similar pattern is apparent in housing services, with greater provision of temporary housing and less spend on supporting people to remain in their homes in the first place. And in social security, where political pressures have led to the protection of support for pensioners but an erosion of support for working-age families, and an expected rise in child poverty.

Planning for the longer term

Addressing the priorities set out in this long read would require a sustained period of high public spending at a time when it is not clear how deep the economic damage will be.

The pandemic has pushed up public borrowing on a huge scale, taking the UK’s debt to GDP ratio above 100%. This will be deeply uncomfortable territory for the government. In his speech to the Conservative party conference, the Chancellor of the Exchequer promised that ‘this Conservative government will always balance the books’. But the government is now being encouraged to hold its nerve in the face of rising levels of government debt and persist with fiscal stimulus and strengthening welfare.

In the same speech the Chancellor said that ‘hard choices are everywhere’, without stating what these are. The worst choice of all would be to reduce government debt by cutting health-generating spending, particularly in local government or through working-age social security. It is not clear what services could be cut after the last decade of austerity. COVID-19 is also likely to result in pressures for sustained increases in other public services to rebuild the economy, reduce inequalities and protect health and wellbeing.

We have previously argued that tax increases will be necessary to fund the changes needed for health and care. Building back health and care services and investing in a healthier society can only be achieved through a higher tax to GDP ratio in the medium term. It remains the case that many European countries raise higher levels of tax as a proportion of their national income.

The hardest choice for the government will be whether to raise taxes in the medium term once the economy has begun to recover. But without doing so, the NHS cannot address waiting times, deliver the ambitions in the long term plan or innovate to accelerate productivity, social care cannot be reformed and some of the key drivers of a healthier population will be undermined.

Further reading

Press release

New analysis reveals daunting scale of financial challenge facing health and care post-COVID

24 November 2020
Press release

The Health Foundation's analysis reveals the scale of funding increases needed to meet the demands...

Event

Webinar: The government Spending Review

Event

Catch up on this Health Foundation webinar, analysing the key headlines from the government's...

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Managing uncertainty: COVID-19 and the NHS long term plan

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Our latest REAL Centre analysis explores the impact of the COVID-19 pandemic on health care...

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