Matt Hancock inherits an NHS funding boost, what will he do with it?

The new Secretary of State for Health and Social Care is a fortunate man. Not only has he just landed himself a top cabinet role, but his predecessor only just finished the very tricky job of persuading the Prime Minister to lock in more than £20bn of extra NHS spending over the next five years.

In his first evidence session with the Health and Social Care Select Committee, Matt Hancock signalled he clearly understands that beneath the good fortune he has a remarkably hard road to navigate.

The problem is that two apparently contradictory things are simultaneously true; £20bn is a huge amount of money, but £20bn is not enough. The extra money promised for the health service is just about enough to stop the NHS getting worse over the next few years but he will be expected to do a lot better than that; politics demands tangible improvement in the quality of care which is visible to the public.  This really matters as the Chancellor has to announce how to pay for the NHS funding boost in this Autumn’s Budget.

Most economists would not consider the current Chancellor a fortunate man. Navigating the nation’s finances in a period of such economic risk and uncertainty on the back of eight years of austerity is about as hard as it gets in peace time. The Office for Budget Responsibility’s latest analysis of the public finances makes clear there is no Brexit dividend to pay for extra NHS spending. Further cuts to other public services are not realistic. Pressures beyond health are rising; the government has just announced pay increases for public sector staff including teachers and members of the armed forces. If the UK is to avoid an unsustainable debt problem, taxes will have to rise to pay for increased NHS spending.

The reason £20bn is not enough is that the UK has a growing and ageing population, with a rising burden of chronic disease. And the cost of delivering care is increasing. There is a new pay deal for NHS staff and new, innovative medicines are expensive. These demand and cost pressures will consume around three quarters of the extra funding.

As we’ve seen with the recent heatwave, emergency departments continue to face significant difficulties and are increasingly operating in winter crisis mode all year round. Hospitals are in deficit and the 18-week referral to treatment waiting time target hasn’t been meet since March 2016. The health service has been raiding its investment budget to bridge the funding gap, but the result is a backlog of safety critical maintenance and under investment in equipment and IT. To sort out this backlog of problems would mean using up pretty much all of the planned funding growth.

This is not exactly the vision of an improved NHS Theresa May spoke of when announcing the new funding. She outlined a range of service improvements including to cancer and mental health. While the NHS has huge strengths, there is a clear need to improve. But better outcomes will not come cheap; improvements in mental health could cost an extra £3bn year in five years’ time.

The Prime Minister also highlighted the need to modernise the NHS; improving efficiency and making better use of technology. The tough choice Hancock now faces is how much money to devote to the immediate pressures on the health service and how much to spend transforming it? This is an occasion when “have your cake and eat it” doesn’t look possible, he will have to choose.

Prioritising the immediate has obvious attractions, but it would be the “Groundhog Day” response to the boom phase of every NHS boom and bust funding cycle. There is a powerful case for spending the new money differently this time. This means thinking hard about waiting times targets; delivering on the targets across all areas of care would cost an extra £2bn in 2023/24. A different approach to waiting times—almost certainly one which reflects the fact that not all care is equally urgent—could create some room for investment in the areas that are key to a sustainable NHS.

While Jeremy Hunt deserves great credit for securing a new funding settlement for NHS England, Hancock’s arguably more difficult task is to spend that money well. To be successful he needs to prioritise the long term but he will also need to pull off his own negotiating triumph with the Treasury.

The 70th anniversary announcement didn’t cover the whole of the health budget, it applied only to front line care. Funding to train new doctors and nurses, spending on public health and capital investment were excluded. And there is the big question of social care which needs increased funding of at least 4 per cent a year and fundamental reform. Without a credible plan for social care it will be hard to spend the extra NHS cash well. If Hancock can resolve this vital issue his future successor really will be fortunate.