News / NHS waits for key autumn funding announcements

31 August 2021 Seamus Ward

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PORTRAIT_news_shutterstock_RishiSunakIt is widely anticipated that chancellor Rishi Sunak will find further funding for the health service, though this could be linked to performance and the reintroduction of historical levels of efficiency savings.

Talks between the Department of Health and Social Care and the Treasury continued over the summer against a backdrop of calls from NHS thinktanks and pressure groups for more funding in the spending review – for areas such as social care, mental health, and the discharge to assess programme.

NHS Providers and the NHS Confederation have called for funding for the discharge programme to be made permanent.

An immediate pressure could be pay, with staff on Agenda for Change contracts, hospital consultants and salaried GPs awarded a 3% rise, backdated to 1 April. It is estimated that this will cost £2.2bn.

Senior managers will not receive a pay increase this year, and doctors in training and associate specialists have their own settlements.

Despite the unions’ claims to the contrary, in the Commons health and social care secretary Sajid Javid acknowledged the ‘economic and fiscal’ challenges, but added that the award was ‘expected to be a real-terms increase’.

Overall, the cost amounted to £1.9bn for Agenda for Change staff and some £300m for consultants, said Mr Javid.

It is unclear whether these figures include pensions and other knock-on costs.

NHS Employers asked if the government would fully fund the award. Although a 2.1% pay rise was assumed for this year in the five-year funding settlement, Covid spending has made health budgets unrecognisable.

Political journalists reported that Downing Street had said the pay rises would be funded from existing budgets, but this would not affect frontline care.

Aside from the pressure of funding the pay increase, health unions are currently consulting members on taking further action. They have said the hike represents a real-terms pay cut, with some economists forecasting 4% inflation this year. In Scotland, an average 4% rise for Agenda for Change staff has been rejected by some unions.

‘Additional funding is always welcome, but finance staff also need early certainty on funding levels so that they can plan for the coming winter – which could bring so many variables in terms of Covid and non-Covid demand, including the risk of outbreaks of other respiratory illnesses,’ said HFMA policy and communications director Emma Knowles.

‘There are other questions, including whether the pay award will be fully funded by the government, or will have to be found from existing budgets.’

The Institute for Fiscal Studies (IFS) said Mr Sunak faces a ‘tricky’ spending review with little room for manoeuvre in the medium to long term.

The IFS said the chancellor could afford a ‘sizeable short-term giveaway’ while remaining within the borrowing figures set out in the March Budget. This would likely be targeted at the public sector.

However, the IFS added that there was little space for recurrent budget increases, and sticking to current plans would mean spending up to £17bn less on public services than had been planned prior to the Covid crisis.

The NHS would be top of the list for additional spending, with Test and Trace, the vaccination programme, adapting to social distancing measures, and meeting the care backlog set to cost an estimated £7bn a year for three years, on top of existing spending commitments.

The Nuffield Trust said NHS providers were already on uneven ground. Its analysis found that, after taking out Covid-related costs, trusts in England are on track to overspend on previously agreed funding by £5bn at the year-end. This was largely attributed to commissioner underestimates of activity levels and provider over-estimates of the efficiencies they could deliver. Non-delivery of planned efficiencies was compounded by the Covid pandemic, which had forced efficiency savings to more or less take a back seat.

Nuffield Trust senior policy analyst Sally Gainsbury, who conducted the analysis, said the government faced difficult decisions in the forthcoming spending review.

But she added: ‘At the very least, the starting point for spending review discussions needs to be the NHS as it really is today, not the parallel fiction that NHS funders might wish it to be.’

She continued: ‘These extra costs, beyond what the NHS anticipated, will exist even once the onslaught of Covid-19 finally stops.

‘It is crucial that they are recognised in the forthcoming spending review. The NHS cannot expect the full gap to be wiped out by extra money, but the Treasury needs to be realistic about where the health service is starting from.’

Ms Gainsbury continued: ‘Closing the gap by 2023/24, for example, would entail annual efficiency savings of around £4bn a year – more than twice the savings rate the year before the pandemic struck.

‘Given that providers have to find around £1bn in efficiencies just to stand still each year, it would be more realistic to assume that at best it will take five years to close this gap.’

It is expected the payment arrangements for the second half of the financial year will be largely unchanged.