Uncertain times

Spending reviews are about headlines and setting envelopes. The devil is always in the detail. But that is arguably even more the case for November’s one-year review, coming as it did part way through the current Covid-19 pandemic and with the country facing a second wave of the virus.

Everyone has been quick to welcome the extra £3bn for the NHS to meet Covid-related pressures and start to make an impression on the growing waiting list and waiting times. However, they are also quick to underline the huge uncertainty facing the NHS currently.

There was already a gap between funding and demand – amply demonstrated by the continuing deficits in many provider organisations heading into this difficult year.

But we simply don’t know how the pandemic will pan out. How long will it continue its grip on the country? What will it cost to run Covid and non-Covid services in parallel? How long will the recovery take and what will catching up cost?

We just don’t know the answers to these questions. Recovery will certainly take more than a year – but whether the extra £3bn is enough to meet the costs of recovery that arise in 2021/22 is not clear. It seems unlikely – although recovery will be as much about capacity as it is about money.

Staff numbers in particular are a major concern. The NHS entered the pandemic carrying around 40,000 nursing and 9,000 medical vacancies. The crisis may have generated more interest in pursuing a future career in health among the wider population. But right now, the service continues to have to cope with virus-related staff absences on top of those existing vacancies.

The availability of staff rather than the money to pay for them may be the biggest brake on progress – although there is also uncertainty over the cost of next year’s pay bill. A pay rise for hardworking and tired staff may be richly deserved, but it is not clear how this will be funded once the pay review bodies have given the chancellor their advice.

There is also uncertainty around the capital programme. The £9.4bn capital departmental expenditure limit is a leap forward from the pre-Covid levels of funding. It is good to see the multi-year programmes to build new hospitals and upgrade existing ones backed by formal Treasury numbers.

But beyond this, the NHS only has one year of operational capital on which to base its plans, despite there being wide-ranging capital requirements to address outside of the national building programme. A full long-term capital settlement is still very much needed.

And there are concerns about whether the level of funding earmarked for the Health Infrastructure Plan will be sufficient to cover all the hospitals due to be built. (We talk to some of the trusts in the first wave of the HIP in The big build).

It is impossible to look at the NHS settlement without looking at the wider context. Chancellor Rishi Sunak quipped that ‘our health emergency is not yet over, and our economic emergency has only just begun’. The economy is due to contract by 11.3% this year and output is not expected to return to pre-crisis levels until the fourth quarter of 2022. The UK is forecast to borrow £394m this year, equivalent to 19% of GDP, with the underlying debt at scary levels.

In that context, the health settlement may look more understandable. However, given the direct links between economic hardship and health service demand, the funding might need to be revisited sooner than is currently planned.