Chansellor George Osborne

Chancellor's £2bn NHS 'downpayment' too little too late too bad

By: Information Daily Staff Writer
Published: Tuesday, December 9, 2014 - 08:28 GMT Jump to Comments

Osborne's £2bn "downpayment" will disappear into the black hole of NHS finances before we even get started on paying for the transition to the 5YFV model of health and care delivery

Now that those of us in the NHS have recovered from the shock of George Osborne’s announcement of an extra £2bn funding for the NHS, it is important to reflect on the real impact that this "additional" money will really have.  Unfortunately the impact will not be as positive as many would expect, and in itself it is not going to enable the transformation of the NHS laid out in the 5 Year Forward View.

The finances of the NHS are not in a good place.  As at the end of September, half way through the NHS’s financial year, NHS providers reported a deficit of £630M.  60% of hospitals are currently reporting a deficit.  This is a significant deterioration on last year when only a quarter of hospitals returned a deficit.  It also does not take into account the provider ‘deficit funding’, which is funding held centrally to offset deficits in individual provider organisations, which serves to mask a much worse underlying position.

The other important but widely missed point about 2013/14 is that NHS spending grew by 2.6% in real terms, an amount well in excess of recent growth.  While funding did not increase, the extra spend came out of the ‘traditional’ in year underspend in the Department of Health, which was massively reduced for the first time since 2006/07. 

So why is expenditure growing so sharply?  The NHS has not mistakenly believed that the need for austerity is over, or stopped driving cost improvement programmes.  A recent survey of finance directors gave the reasons for the predicted overspends as unforeseen increases in pay costs, and lower than expected savings from cost improvement programmes.  This has come, at least in part, out of a response to quality concerns, requirements to meet minimum staffing levels, and a reliance on expensive bank and agency staff.

Organisations have not simply prioritised operational performance over controlling finances.  At the same time as expenditure has grown, performance has deteriorated.  Waiting times in A&E are at their highest level for a decade, and waiting times for operations at their highest level since 2008. 

So what is going on?  Well at least part of the answer lies outside of hospitals.  Since 2010 spending on adult social care has reduced by 12% in real terms.  Since 2005 total investment in general practice fell by 7.6%.  If anyone thinks this can happen without knock on consequences for the system they are mistaken.  It means care in its broadest sense has been cut outside of hospitals.  If people don’t receive the care they need outside of hospitals they end up in hospital.  If hospitals are not resourced to meet this extra demand they are going to struggle, and this is precisely what we are seeing now.

Depressingly, this situation is going to get worse not better.  Experts predict a £4.3bn gap in adult social care funding by 2020, and a cut of 29% of the total current budget.  These cuts won’t happen in isolation; they will inevitably affect the system as a whole.  And remember the Better Care Fund doesn’t help, because it is simply the movement of existing money not the creation of new funding. 

The King’s Fund estimated prior to the Chancellor’s Autumn Statement that an additional £2bn was required to avert a full blown financial crisis in the NHS next year.  I suspect the King’s Fund’s calculations and those of the treasury matched.  The £2bn is extremely welcome, but it is not a luxury.  It is money the NHS could not cope without.

But with the announcement of an additional £2bn comes an expectation of improvement.  If in reality it is filling a gap that already exists, it can’t also become a fund to enable change.  Without investment in transformation the reality is that transformation is not going to happen.  We have to break the trend of ever increasing reliance on hospital care, but we can’t do that while we continue to make cuts in care outside of hospitals.  And we can’t invest in out of hospital care while the activity continues to pour into hospitals.  Some element of double running is required to break the negative cycle we are in.

Describing this money as a ‘down payment on the five year forward view’ sets an unrealistic expectation, because it implies it is an investment in making the changes needed to break this cycle.  But in reality it is not, as it is meeting the demand for funding that already exists within the system. 

The money will soon disappear into the black hole of NHS finances, and we will be left scratching our heads trying to work out where it has gone.

The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the official policy or position of The Information Daily, its parent company or any associated businesses.

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