Osborne hides his fiscal secrets under the hospital bed

The NHS promises yet more mythical savings to unlock a few crumbs from the Chancellor's red box. Meanwhile its deficit soars to Greek levels – and the shadow of more NHS charges stalks the policy corridors…

James Shrimpling
9 July 2015

Image: Greek chorus, Wikipedia. Behind the promises of mythic savings, does a tragedy await the NHS?

You could be forgiven for thinking the NHS has done well out of the Budget. While spending on unprotected government departments will have fallen by about a third between 2010 and 2020, the NHS has managed to secure an ‘extra’ £8 billion a year, thanks to some pre-election politicking from Simon Stevens, head of NHS England.

In reality, the next five years for the NHS in England look less and less rosy, the closer you look. Stevens’ own financial predictions outline the size of the problem - if demand for healthcare continues to grow at the same pace, there will be a £30 billion shortfall by 2020. Osborne has committed to closing just over a quarter of that funding gap – but it is unclear when and how this £8 billion will be phased in, and crucially, where exactly the money will come from.

More concerning still is the remaining £22 billion. By 2020, the English NHS will be running up an annual deficit nearly five times that of the Greek government, even with Osborne’s unfunded extra money.

The cracks are already beginning to show. The UK lags behind its peers on a range of health outcomes, including heart attack mortality, stroke deaths, and suicides among inpatients with mental disorders. Health spending as a proportion of national income is among the lowest of the advanced economies. As the BBC’s health editor Hugh Pym put it, ‘if we are not spending as much as the others, perhaps it’s not surprising that many of the results are mediocre’.

So what to do? Can the funding gap be closed while improving care quality and keeping the government's promise not to raise taxes? This is where Stevens, for all his nimble manoeuvering before the election, may prove to have come unstuck. As part of the deal to secure the fabled £8 billion, NHS England committed to make £22 billion of efficiency savings, chiefly by introducing redesigned ‘models of care’. Jeremy Hunt considers this the NHS’s ‘side of the bargain’.

The deal is looking increasingly Faustian. NHS finance directors forecast a deficit in two-thirds of trusts this year. In the past, deficits were run only in a handful of known basketcase trusts. Today, even the great and the good of the health world expect to end the year in the red. Following the Department of Health’s bailout of England’s hospitals to the tune of £874m last year, 2015/16’s deficit looks likely to top £2 billion in acute hospital care alone. If there were easy savings to be made, this would not be happening.

In a further twist reminiscent of the Greek economic crisis, bailouts from the Department of Health are expected to be converted into loans, repayable with interest. Having failed to close the fiscal deficit by 2015 as originally promised, the government is transferring the problem from the Treasury to the nation’s hospitals, stashing its secrets under the NHS’s bed. Instructed by the Labour government to become financially ‘independent’ Foundation Trusts, and in the absence of a statutory duty upon the Secretary of State to provide NHS services, many hospitals’ boards now bear sole responsibility for the blackholes in their balance sheets.

To commit the NHS to an unprecedented period of efficiency savings against this backdrop is risky. To have also shut the door on two of the areas where a glimmer of hope may have been visible is wilfully irresponsible.

Both social care and public health are now the responsibility of local authorities, whose budgets have been cut by nearly a quarter in real terms over the past five years. With appropriate funding, social care could help support frail elderly patients in the community – easing the strain on the NHS – but instead, 360,000 fewer older people now receive social care services than five years ago.

Meanwhile ‘ring-fenced’ public health budgets to pay for things like immunisation and screening are being raided and funneled into services only tangentially related to health, in an attempt to plug holes in council finances. A BMJ investigation found that just 45% of public health professionals believe money is being spent appropriately. And now that public health no longer counts as an area of protected spending, the government is consulting on a further £200m cut.

In the absence of investment in prevention and social care, the scramble to make savings will be characterised by the usual cast of health policy zombies (ideas that are regularly killed off but somehow still rise from the dead and eat into otherwise sensible people’s brains) and unicorns (breathtaking but yet to be spotted in the wild).

Integrated care is the NHS’s favourite unicorn policy. Eliminating the structural gap between health and social care will release savings and improve care, we are told. But real life sightings are few and far between: evaluations of integrated care pilots have found they take many years to implement and even then are rarely successful. As anyone who has lived through a merger will know, improvements aren’t achieved through structural change alone, and integrated care doesn’t address the core problem of mixing a comprehensive health service free at the point of use with a broken social care system of means-testing and costly care bills.

User charges and co-payments are chief among the zombies, pushed vociferously by right-wing think tank Reform - who've provided Cameron with his key health advisor. In England we are most familiar with prescription charges, despite international evidence that free prescriptions ultimately save money by reducing preventable ill health. Jeremy Hunt’s latest initiative involves rather conveniently placing price tags on prescriptions costing over £20. Expect proposals for further user charges to rise from the dead again when integrating care fails to cut costs.

Put both of these together, along with the introduction of personal health budgets (already underway, and being rolled out to millions of older and sicker people by 2018), and you get a nightmare scenario: rising and expanding user charges; pressure on patients to ration their own care or pay to top it up; and a worst-of-both-worlds mash-up of funding models. Add devolved, council-run healthcare budgets into the mix, as is happening in Manchester, and the NHS will be gone in all but name – no longer a national service but a fragmented mess left to councils and patients to clear up.

It is no surprise then that the plan to find £22 billion in savings is rightly starting to receive more scrutiny. Former Lib Dem health minister Norman Lamb has described it as ‘virtually impossible’, while health economist Professor Alan Maynard has called it ‘unattainable’ and a ‘fiction’. But more is needed. NHS England must be more open as to the basis of its claims; the NHS community must unite to batter off the policy zombies and dispel rumours of unicorns; and the public must be reminded of Nye Bevan’s warning that the NHS will only exist for ‘as long as there are folk left with the faith to fight for it’. 

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