The promised £20bn is still nowhere near enoughby Anita Charlesworth / October 23, 2018 / Leave a comment
With the end of party conference season and in the midst of Brexit turmoil, the next big domestic event is the Budget on 29th October. But while he may not don Theresa May’s dancing shoes, it looks like Chancellor Philip Hammond may need a good pair of running shoes. For this budget, he will need to take lessons from the Red Queen who, in Through the Looking-Glass, tells Alice that the world keeps shifting so quickly under her feet that she has to keep running just to keep her position.
The political backdrop to the Budget is clear—the government needs good news and to deliver some tangible improvements on domestic policy. In her party conference speech earlier this month, the prime minister signalled an end to austerity and reiterated her commitment to provide an additional £20.5bn for the NHS.
This sets Hammond a huge challenge. The IFS suggests that the economy is around 2 per cent smaller today than expected before the 2016 referendum. That’s a hit of around £40bn to our national prosperity. Looking forward the outlook remains one of weak economic growth—perhaps 1.5 per cent next year and they expect investment to remain subdued until Brexit uncertainty is resolved. The IFS concludes that, “without much higher growth than forecast or substantial tax rises, ending austerity is not compatible with eliminating the deficit by the mid-2020s.” Ouch. Eliminating the deficit has been a keystone of Conservative ambition since 2010.
That the NHS is the focus makes clear political sense as it consistently tops the public’s worry list beyond Brexit. But transforming health into a good news story through the Autumn will be very hard. The government needs to run very fast if it’s not to lose ground.
The prime minister’s extra funding is a promise spread over the next five years. This might look like a classic case of “jam tomorrow” which won’t be enough if TV screens are full of pictures of a winter crisis. This is already the opposition’s narrative and, with warnings from NHS hospitals of even more severe challenges this winter than last, one that will have bite if services don’t improve. IPSOS Mori recently surveyed people in 28 countries and found that the British top the league table of countries worried that their health service is overstretched. They are right. Hospitals are at capacity and the NHS has big staffing problems; GP numbers are falling and 1 in 10 nursing posts are vacant.
Another challenge is where to find the £20.5bn. If the Chancellor is to deliver on the prime minister’s funding pledge he has three options: increase tax, cut spending elsewhere or borrow more. Since 2010, cuts to other public services and borrowing have taken the strain for extra NHS funding. As recent debate about universal credit shows, we reached the end of the runway on cuts elsewhere some time ago, and there is a strong case for unwinding some of those already in the pipeline.
The prime minister acknowledged that people are fed up with austerity. But ending austerity is not cheap—the IFS reports that the chancellor currently has a further £7bn of welfare cuts baked into his public finance plans. Increasing tax is the logical, sustainable option for public finances but hard politically, and difficult with Brexit uncertainty and weak household finances. Extra borrowing looks likely in the short term but it is another example of the can being kicked down the road.
But perhaps the most frustrating challenge to the government’s good news story is that, while the extra funding is a lot of money, it’s also too little. The prime minister has tasked the health service with producing a long-term plan that will set out what the extra money will buy in terms of improved health. The sad reality is, not that much.
This is another example of the “red queen effect” in action. It is why health care is such a problem for public spending; new technology, an ageing population and rising chronic disease result in ever increasing demand. If quality is to be maintained, we are forced to keep running merely to stand still. Simply maintaining access and quality would require funding increases of around 3.3 per cent a year. The extra £20.5bn amounts to 3.4 per cent a year which leaves almost nothing for improvements to cancer, mental health, primary care or children’s services; all areas with a clear need for investment and improvement. And that’s before the NHS tries to leap into the digital age, which looks like Matt Hancock’s priority as Health Secretary.
Further, the NHS funding only covers part of the health budget, leaving public health, workforce training and capital investment as unfinished business. There is also the huge problem of social care, which has been cut over the last decade of austerity, while the number of elderly people has risen rapidly. This will require a lot of running within the NHS to get close to inching forward.