Incisive Health analysis of the NHS funding settlement

The Government is playing a high-risk political game with the NHS funding announcement. If it works, the Government will have neutralised the NHS as a political issue by the time of the next election. But there are a number of reasons why it may fail.

The headline announcement was of a 3.4% real terms increase per year for NHS England until 2023-24, frontloaded to 3.6% in 2019-20 and 2020-2021. Ostensibly, this brings NHS funding virtually into line with the long-term average of NHS funding increases. It also, crucially, works out as more than the £350 million a week for the NHS promised to us as a Brexit dividend. The Conservative Party as a whole will own Brexit at the next general election, so if this Parliament lasts the distance, the Tories now at least have a line which will pass the red-face test. Assuming a dollop of efficiency gains too, and NHS services will be delivering the improvements needed to show the electorate that the NHS really is safe with the Conservatives.

That’s the theory. But there are three key reasons why it may not work out like that in practice.

1. We don’t yet know the detail – and the money may not be enough

The figures placed into the public domain following yesterday’s announcement tell us what is happening to revenue spending by NHS England only (NHS England ‘RDEL’ in the jargon). To truly understand how good this settlement is for the NHS, we need to have a better understanding of how all health spending is changing (what is known in the jargon as the Department of Health and Social Care’s ‘TDEL’). DHSC TDEL includes items of spending such as:

  • Capital spending in the NHS, for things like hospital buildings, and IT
  • Day-to-day spending on education and training, including the Health Education England budget which pays for junior doctors
  • Day-to-day spending on public health, including vaccines and public health awareness campaigns

We don’t yet know how these will change following yesterday’s announcement.

We also need to have a better understanding of the baseline figure being used to measure the announced increases against – including what the baseline year is and what may or may not be included in the baseline figure. In addition, we need to understand how spending on social care will change alongside the changes in overall healthcare spending to truly understand how positive yesterday’s announcement is.

The Treasury is publishing more details later today – but it’s looking very likely that we’ll only get a significantly better picture in the 2018 Budget at the earliest, and that we will only get the full picture in the 2019 Spending Review.

2. The public will be asked to contribute more 

Beyond the detail of the settlement itself, there is the small matter of how the increases in spending (whatever they are) will be paid for. Even being generous, and assuming that there may be a Brexit dividend (which is just about possible at the moment, given we don’t know the terms of the deal), it is clear that the vast bulk – if not all – of the spending increases will need to be bought by higher taxes and / or higher borrowing. If the former, then this may negate the political advantage of spending more on the NHS – particularly if there is no discernible improvement in services. And with the right wing of the Conservative Party growling about the prospect of tax increases in this morning’s papers – and the perilousness of seeking to vote tax increases through a hung Parliament – there is a good chance virtually all of the extra spending will need to be bought with borrowed money.

3. The Government can’t afford to match this spending in other areas

This announcement means that other areas of public spending are going to continue to be squeezed. Defence spending may not be the kind of thing to worry voters much, but it does concern Conservative MPs – and therefore should concern the Prime Minister. The path she must navigate through her party’s internal politics to avoid her downfall looks that bit more treacherous this morning. And even if defence spending does not translate into votes, police spending does: if the Government isn’t able to keep a lid on crime – or, rather, the fear of crime that dictates how people vote – then any political gain from spending more on the NHS may be lost.

The above paints a doomsday scenario of falling NHS standards, declining public services, rows about higher taxes, and more borrowing – all of which don’t resemble the recipe for electoral success that increases in NHS spending should be, and which the Government hopes for. But the Government is gambling that this won’t come to pass: gambling that efficiency gains will create headroom for improvements in services, that it can justify a tax rise and that – whisper it – economic growth may come to the rescue of the other public services.

It’s quite a tall order, but the Government might just pull it off – if it’s lucky. But it is a high-risk political game.