In 2010, when David Cameron’s coalition took office the NHS was at its peak performance after a decade of significant real terms investment under Tony Blair and Gordon Brown. There were no 40 hour waits for ambulances, and no 24 hour waits in A&E: very few patients exceeded the 4 Hour A&E wait target.
But George Osborne as Chancellor, ignoring his party’s election commitment to outspend new Labour, initiated an austerity regime that halted investment in England’s NHS and began over a decade of decline. His 2010 Spending Review set a £20bn target for “efficiency savings” by 2015 – equivalent to 4% per year, a level that has never been achieved by the NHS.
At every stage of the subsequent decade-plus of real terms cuts in spending the government has been warned of the consequences by NHS management, think tanks and professional bodies – all of whom have been ignored.
The NHS Confederation also warned in 2012 that the same austerity also impacted on local authorities and their ability to finance and commission social service support for a rapidly growing population of older residents – leading inevitably to delays in discharging older patients from hospitals.
By the end of 2019 NHS Providers Chief Executive Chris Hopson (now NHS England’s “director of Strategy” calculated that if NHS spending since David Cameron first took office had just kept pace with the previous long term average annual increase, spending on health and social care would by then have been £35 billion per year higher than it was.
The impact of the squeeze on funding was from the outset largely focused on staff, whose pay was subject to a prolonged freeze, prompting a 2013 warning from the regulator Monitor that appears strikingly prophetic ten years later:
“The wage freeze from 2010/11 to 2012/13 and the 1% cap on pay that is due to lift in 2015 are together predicted to save a cumulative total of £5 billion by 2015. As a result, wage levels in future years will be calculated from a lower base, suggesting this measure should help productivity in the long term. However, we do not believe this is a sustainable strategy for improving productivity in the NHS. … Capping wages for longer to keep costs down would be self-defeating for the sector in the long term as it would make recruiting and retaining good quality professionals increasingly difficult.”
Nonetheless the same unsustainable strategy has continued for most of the last 12 years.
In March 2013 the NHS Confederation warned 2011-2015 were set to be the meanest-ever years for growth in funding since 1948, with real terms spending increasing by just 0.1% per year. The National Audit Office warned that the NHS had to make savings of £20bn by 2015 while also driving up the quality of services, improving outcomes and addressing the needs of a growing number of older people.
In January 2014 the Nuffield Trust warned that unless spending levels were increased the gap between NHS resources and demand on services would reach £30bn by 2022. Office of Budget Responsibility figures showed health spending as a share of GDP set to fall back from 6.5% in 2012 to 6.2% in 2015.
In January 2015 NHS Providers for the first time ever refused to sign off on the tariff of fees payable to NHS trusts for each patient treated, arguing that a fifth year of cuts would put safe treatment at risk. The priority attached to balanced budgets rather than patient care was underlined when the hospitals regulator Monitor soon after the 2015 general election told trusts that all penalties for missing waiting time targets or failing to ensure safe staffing levels were suspended in the quest for cash savings.
In 2016, with England’s NHS rapidly reorganised into 44 “Sustainability and Transformation Plans”, the scale of the under-funding was revealed. The published plans, drawn up in secret, with no public consultation, collectively projected combined deficits of £23 billion by 2020/21, of which 82% (almost £19bn) was for NHS services and the remainder for social care. The plans, almost all of which were hopelessly unrealistic and later discarded, also called (in vain) for £14 billion in capital investment.
Early in 2017 NHS Providers produced a report describing the targets set by NHS England as “Mission Impossible” given the constraints on funding: they also pointed out that of £2bn additional NHS funding, just £650m had gone to NHS providers, compared with £900m to the private sector. In advance of the 2017 election NHS Providers published a manifesto demanding a £5bn per year increase in NHS spending to 2020 and £10bn of new capital to cover backlog maintenance and expansion projects.
In July 2017 Health Secretary Jeremy Hunt promised a £1.3bn plan for better mental health services including 21,000 extra staff by 2021. At the last count (October 2022) only 4,000 additional nurses were in post, with some grades of staff fewer in number than five years earlier.
In January 2018 Theresa May and Jeremy Hunt together apologised for the poor state of the NHS, and May went on to promise a long term settlement as a ‘birthday present’ for the NHS as it approached its 70th anniversary. It was announced as an increase of just £20bn in real terms – over five years to 2023.
This same pledge, translated into apparently more generous cash terms, was the same £33.9 billion of “record funding” that Boris Johnson a year later committed to embody in legislation in the 2019 election: the Treasury admitted this was the value in real terms.
The rhetoric however did change, with Johnson claiming to be ending austerity and promising first 40, later rising to 48 “new hospitals” to be completed. However no more than £2.7bn has ever been committed to finance these projects, and no scheme that was not already under way before Johnson’s promise has yet begun work.
The Health Foundation had warned in March 2019 that NHS capital spending had actually fallen in in real terms since 2010/11, making the promise of new hospitals without a major new allocation of funding seem even less convincing.
Another main factor concealing the financial gap created by under-funding has been the burgeoning deficits and debts run up by NHS trusts. The Health Service Journal in 2018 estimated that total borrowing and deficits of trusts in England had reached £14bn: this was tacitly acknowledged early in 2020 when Matt Hancock took steps to convert £13.4bn of trusts’ borrowing into Public Dividend Capital, as the pandemic took hold. The underlying deficits however have not been addressed.
Although large sums of additional Covid money technically flowed through the Department of Health and Social Care in 2020-21, this spending was in fact outside the control of the NHS, with billions flowing into obscure contracts with Tory donors and cronies for PPE, and with consultancies and contractors delivering the barely functional Test and Trace.
These huge sums of money, much of it wasted, together with the decline of the hobbled economy during the months of lockdown, hugely distorted the picture on health spending as a share of GDP, apparently increasing it to 11.9% in 2020-21, to the delight of right wing politicians and commentators eager to claim the NHS is a lavishly funded failure.
In 2020 spending on private providers of clinical care went up by a massive 26% in England, almost all of this down to a woefully poor contract that lined the pockets of private hospital shareholders but actually resulted in private hospitals delivering fewer operations to NHS patients. It’s relevant to note that the entire private acute hospital sector has only around 8,000 beds according to analysts Laing Buisson, and is dependent for staffing any increase in activity on recruiting staff already employed by the NHS.
Budget statements since March 2021 have scaled back additional funding for Covid-19, leaving the NHS to cope with the pressures despite the continued significant use of front-line beds (6382 beds in England occupied by Covid patients on February 8).
And with over 13,000 beds routinely filled by patients who can’t be discharged for lack of social care, England’s NHS now has virtually 20% of its available general and acute beds out of action for admitting emergency or elective patients.
It therefore lacks spare hospital capacity to swiftly reduce the backlog of elective treatment that further increased what was already a bloated 4.5m waiting list in 2019 to the current 7 million-plus, while it also lacks the capital and revenue required to increase its own community health and primary care services outside hospital.
It is this constraint on NHS front line capacity and on capital investment that has driven an increased reliance on using beds in private hospitals to treat NHS patients – despite the previous experience of private sector failures to deliver during the peak of the pandemic, despite costs and inefficiencies this creates, and despite growing concerns in trusts and ICBs that the flow of funds out of the NHS is undermining efforts to balance the books.
Official figures show NHS spending on private providers in England has fallen back slightly from the peak of 2020-21, but has still risen 60% in seven years – from £6.5bn in 2013/14 to £9.2bn in 2018/19 and £10.9bn in 2021/22 – partly as a result of the Health and Social Care Act in 2012 and partly the sheer lack of NHS capital and revenue to expand and run its own capacity.
Another result has been that, according to the Economist, in the second week of January, 95.7% of beds in acute and general wards in England were occupied, the second-highest figure ever recorded. The Economist notes reducing bed numbers is a policy that has in the past been endorsed by all parties, but warns: “But if you want more people out of hospital, you must also fund the alternatives.”
The government did appear to change its approach slightly in September 2021 with the announcement of £36bn of tax increases over three years, landing most heavily on those on lower incomes: this was misleadingly branded as the “health and care levy” although less than half the money was to go to England’s NHS. In the event the levy was scrapped in a whirlwind budget by Kwasi Kwarteng, a decision subsequently endorsed by Chancellor Jeremy Hunt, although the extra money has been made available. It provides a little relief for the NHS and social care, although its value has been drastically reduced by rampant inflation, and it was never enough to deliver real terms growth.
Austerity, briefly suspended during the peak Covid pandemic, is firmly restored as policy. The resource gap is again beginning to grow. In July 2022 the Nuffield Trust repeated its warnings that funding levels were unrealistically low before the pandemic, and even further adrift since “with NHS England, the Department of Health and Social Care and the Treasury seemingly caught in a mutual confidence trick where successive funding rounds were premised on unachievable assumptions about efficiency savings and demand management.”
King’s Fund figures in early 2022 had charted the dramatic squeeze on spending since 2010. From these we can calculate that if spending had increased at the pre-2010 average, NHS spending in England would have been £33 billion higher than it was in 2021-22: the cumulative gap has risen rapidly to £200bn over 12 years. By comparison the Wanless Report in 2002 found that NHS funding had lagged behind European average levels of spending by £267bn … over the previous 25 years.
The Health Foundation in November 2022 estimated the extent to which pre-pandemic UK spending on health had fallen behind spending in European countries, and found that:
- “Average day-to-day health spending in the UK between 2010 and 2019 was £3,005 per person – 18% below the EU14 average of £3,655.
- If UK spending per person had matched the EU14 average, then the UK would have spent an average of £227bn a year on health between 2010 and 2019 – £40bn higher than actual average annual spending during this period (£187bn).”
Note that these figures, which are much higher than many previous estimates, are for ALL health spending, including private health care and out of pocket spending, not simply the NHS: “On average UK government health spending between 2010 and 2019 was £149bn per year in current terms.” The Health Foundation also points out that there was evidence of inadequate spending on health care well before the Covid pandemic:
“Even before the pandemic, the proportion of people in the UK self-reporting that they needed treatment but could not access it was one of the highest in Europe. So, systems that are already running at capacity may become reliant on emergency funding or on having to redeploy resources and deprioritise certain services to deal with surges in demand.”
Meanwhile, with no hope of growing services to meet demand, NHS England has committed itself to seeking to generate £12 billion of “efficiency savings” by 2024/25 – a target made more difficult by persistently high inflation. Newly-established Integrated Care Boards are struggling, with many failing, to balance the books for 2022/23 and increasingly alarmed at the challenges they face in delivering still more “efficiencies” next year and the year after.
In January 2023 a Health Foundation report found that as a result of the 2022 Autumn statement spending will be half the level needed to keep pace with demographic and other cost pressures:
“in real terms, core day-to-day spending on the NHS will rise by 2% a year by 2024/25, while capital spending will grow by just 0.2%.”
Reduced capacity
Since 2010 6,025 general and acute NHS beds have closed in England, along with 4,734 mental health beds – reducing capacity at the very point the population was growing and the proportion of older people more likely to need health care has been rising sharply.
Recent calls by NHS England for opening 5,000 “extra” actual or ‘virtual’ beds would still leave England’s NHS in 2023 with fewer acute beds than it had in 2010. However the plan is for nowhere near as many new beds: follow-up analysis by the HSJ has clarified that the proposal is only to introduce 1000 ‘new’ beds, with the remaining 4000 made up from existing beds which will be moved from other areas, such as top-up bays and corridors.
The rundown of capacity has led to an increase in use of private sector provision, not only private hospitals and clinics performing operations on NHS patients but also contracting out of community health and (especially) mental health services to fill gaps in the NHS.
NHS England vacancy figures, currently 133,000, are an imperfect measure of actual vacancies because the extensive use of (more costly) agency staff, with most ICBs set to breach the limits on agency spending imposed by NHS England. But numbers of vacant clinical posts have increased dramatically in the past 12 months, along with anecdotal evidence of an exodus of staff for better pay, conditions and less stressful jobs in retail and elsewhere as the government refuses to negotiate an improved settlement on pay with trade unions.
The bill for backlog maintenance in England’s hospitals has rocketed from under £6bn in 2019 to £10.2 bn in 2022, with at least half a dozen hospitals built in the 1970s with defective concrete planks in danger of literally falling down.
The result of reducing services is more lives cut short, or blighted by avoidable illness and disability. The Economist, the voice of neoliberalism, has at least partially endorsed the Royal College of Emergency Medicine’s warning that delays in A&E are causing an increase in avoidable deaths.
To make matters worse, the drastic 24% cutback that has been made to public health budgets since 2015 has held back preventative measures to reduce the burden on the NHS. The health of the nation is falling back further as the cost of living crisis, impacting on food prices and the leap in the cost of energy have left millions dependent on food banks and turning off heating during the winter.
Why the NHS needs an extra £25 billion
These proposals and a £20bn demand were the basis on which the SOSNHS alliance was built in early 2010, attracting tens of thousands of signatures, and winning support from over 50 organisations including the main health unions, many other major unions and a wide variety of campaigning organisations.
That figure was agreed as a basis for campaigning before the big hike in the cost of living that has led to the current pay disputes, and the first-ever national strike action by the RCN, and it’s obvious that the total required is higher now than a year ago.
A total of £14 billion is needed now to repair and rebuild crumbling infrastructure and reopen beds left empty since Covid-19 struck. This includes:
£5bn to tackle the most urgent of the backlog maintenance issues, for which the total bill has soared to £10.2 billion: repair crumbling buildings and replace clapped-out equipment.
Up to £6bn needed sooner rather than later to rebuild hospitals built in the 1970s using aerated concrete planks, which are in imminent danger of collapse, and costly even to prop up.
And £3bn is needed to reorganise, rebuild and in some cases refurbish hospital buildings to enable them to reopen beds which have been closed since 2010, including some closed in 2020 to allow for social distancing and infection control.
On top of this the Royal College of Psychiatrists has called for £3bn capital, and £5bn in additional recovery revenue over 3 years to equip mental health services to cope with the increased demands since the pandemic and expand services for adults and children.
NHS capital is also needed so new community diagnostic hubs and surgical centres can be built without depending on private sector involvement.
Rebuild public health: The Health Foundation has calculated that an extra £1.4bn a year by 2024/25 is now needed to reverse years of cuts in public health, which should be leading a locally based test and trace system and preventive work to reduce ill health.
Invest in fair pay: this is essential to settle the ongoing disputes with the unions, but also crucially to help restore morale. The government has claimed each 1% increase in pay for the whole non-medical workforce in England will cost around £900 million, although thewy have later revised this down to £700m. So even to increase the average 4% 2022/23 pay award by 6% to match double digit food price inflation and energy costs needs an extra £4.2bn.
Additional funding is also needed to reform the grotesque pension problems facing the most senior doctors and begin to restore the value of junior doctors’ salaries. Everybody but the government seems to agree that a pay award for all staff is essential to help recruit, retain and grow the workforce.
The long-promised promised additional 50,000 nurses will cost at least another £1.7bn.
This list has not even mentioned capital funding to build 48 or more new hospitals, or the expansion of primary care and community health services that need to run alongside major investment to expand social care, and address the problem of delayed discharge of 13,000 patients.
So £20bn is just a down payment, and it has to be linked to a commitment to another decade of substantial real terms investment in the NHS, to rescue it from an even deeper decline than New Labour dug it out from in 2000-2010.
How could the extra money be raised?
Chancellor Jeremy Hunt has said he accepts that the NHS is “on the brink of collapse” and admitted there are “massive pressures in the NHS … with doctors, nurses on the frontline frankly under unbearable pressure”. But he still argues more real terms cuts in the NHS are needed to help “fix” the economy that has been broken by years of austerity since 2010.
His autumn statement gave the NHS just half of the additional £7bn it needed, leaving NHS England committed to £12bn of savings over 3 years and no new money for any capital investment.
The Lowdown has explained how four measures that could raise an additional £40bn a year to fund public services without taxing anyone earning under £80,000 per year:
- scrap non-dom tax status (raising £3bn);
- a 1% tax on wealth above £5 million (£10bn);
- a 45% tax on pay above £80,000 and 50% tax on pay above £125,000 (£6bn);
- and tax dividends and capital gains at the same rates as income tax (£21bn).
It’s hard to see why this approach should not be implemented to get the wealthiest who have gained most to pay a fairer share towards public services.
It’s more than enough to meet the pay demands of health workers, teachers, university staff and others fighting now, increase funding for NHS and social care – and to increase Universal Credit and other benefits to ensure more support for the poorest and lowest paid.
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