Saffron Cordery: Spending review—time to do the maths

Saffron CorderyI can’t think of a time when the machinery of government has had to work harder. Austerity is a tough call for everyone. Looking out of the windows of NHS Providers’ offices I can see the home of HM Treasury, where the number crunchers, the money men and women, and the purse string holders hang out. It seems pretty busy. They are doing the maths.

And it’s no surprise. All minds are focused on the spending review, when the government of the day works out not only how it will spend public money for the next three years, but the processes it will use.

Anyone seeking to influence government knows this is a big deal, and anyone working in, with, and alongside the NHS hopes that they get the right answer—after all it is fundamental to the future of health and social care services in England. But the sums are hard.

For nearly a year the health service has been steeped in the Five Year Forward View. This set out a vision for the future direction of health (not health and social care). Among its plans and proposals, it identified that given 4% year on year increases in demand and costs of services, the NHS will face a £30 billion funding gap by 2020/21. The health service is expected to achieve £22 billion in savings by increasing its productivity by 2 -3% every year. In return the government will close the £8 billion gap by 2020.

So far so simple as arithmetic goes: 22 + 8 = 30. However, it’s not as easy as all that.

During the last Parliament, the NHS delivered £20 billion of savings, as well as coping with an inexorable increase in demand and costs. The low hanging fruit of one off savings has now been harvested and opportunities to make further savings are limited. Couple this with the NHS’s challenge of both transforming services and increasing productivity beyond what it has historically achieved, beyond what comparative western healthcare systems have achieved, and beyond what the UK economy achieves, and we have exceptional and unprecedented circumstances and some very hard sums.

If we are to get the spending review and health service maths right, we need to think of them as algebra as well as arithmetic. These aren’t just sums, they are equations, with different components that need to be balanced, and which have consequences if they aren’t.

One component is the need to invest in transformation across the NHS. Many of the new care models envisaged by the Five Year Forward View may result in substantially better care for patients, but these new approaches will also require startup funding and parallel running costs at a time when the extra £8 billion of funding is needed simply to keep the existing NHS show on the road. We need to fully fund the new approaches set out in the Five Year Forward View and ensure a smooth glide path to bring them into to land. If we don’t the consequences will be severe:

The NHS will face ever increasing demand pressure, and in the absence of funding to match this, NHS services may need to be reduced and/or rationed;

The NHS will be increasingly less able to deliver value for money, as it will not have the resources to transform care to the benefit of patients and service users. Running the existing model harder is not in the best interests of patients or tax payers;

NHS deficits will grow and become entrenched, with an increasing proportion of resources diverted to servicing deficits rather than being invested in transforming care; and

Underinvestment in the NHS workforce—through long term pay restraint, an inadequate supply of trained staff, and a mismatch between job roles and care needs—will lead to growing recruitment and retention issues and, ultimately, poorer patient care.

Avoiding this demands a system level response, with everyone working together to solve the equation by deploying new approaches, capabilities, and resources, and—critically, for providers of NHS care—by giving the time to deliver the necessary step change in productivity.

But even then the benefits will not be immediate. As identified in the interim report by productivity peer Lord Carter, the sector could make savings of up to £5bn a year, but only by 2019/20 and with appropriate support. This leaves substantial pressure facing the sector in 2016/17 and 2017/18, as current initiatives will do little to address the funding gap in the intervening years.

So back to the maths. The government made the vital commitment to increasing real term investment in the NHS by £8 billion by 2020. How the funding is used is critical. As we set out in our spending review submission, there are three key conditions for maximising the value of this funding:

1. A renewed local-national partnership
The size and scale of the task means that national policy makers and local leaders must develop a more open, transparent, and trusting partnership. This means shared ownership of the challenges ahead and a realistic assessment of the investment and timescales required to achieve transformation and greater efficiency. A system wide plan, which fully engages providers and respects local accountabilities, is fundamental.

2. Enabling value for money and confidence in long term investment
The additional £8 billion funding needs to be allocated to the service as soon as possible so that investment can begin and its benefits realised in the near future. There needs to be a multi-year funding settlement for the NHS to give the service confidence in the resources that will be available and to enable long term—rather than annual—investment.

3. A joined-up approach to public services funding
The sustainability of public services is interdependent. The NHS is particularly affected by resourcing and demand levels in adult social care and public health, and for the NHS to succeed, these services must also succeed. Both adult social care and public health funding need to be protected alongside NHS funding if the NHS is to maximise the additional investment.

When they’ve finished doing the maths in the Treasury building and the spending review is published on 25 November, I can only hope that everyone in the health and care system thinks they’ve got their sums right.

Saffron Cordery is director of policy and strategy at NHS Providers. You can follow her on Twitter @Saffron_Policy

Competing interests: I have read and understood BMJ policy on declaration of interests and declare the following interests: None.