Issues For Our NHS > NHS Funding

NHS Funding

Funding has become the major issue for the NHS as the organisation attempts to balance escalating demand due to an aging population and increased patient expectations with stagnant funding and demands to make major savings. According to independent analysts the NHS will need an extra £30 billion in its budget in 2020/21 if the NHS is to deliver care to an increasing population at the current standard of care.

An unprecedented funding squeeze

The squeeze on NHS funding began in 2010, from then until 2015 government spending on the NHS rose at just 0.9% a year in real terms according to analysts at The Health Foundation and The Kings Fund. This is a lot less than the average real terms increase of 3.7% per year since the NHS was created in 1948 and it is way below the average increase of 8.6% per year between 2001/02 and 2004/05. The government’s planned spending on the NHS from 2015/16 to 2020/21 also amounts to an average annual rise of just 0.9%. Factor in the need to find efficiency savings of £20 billion from 2010 to 2015 and a further £22 billion from 2015/16 to 2020/21, and the result is an NHS starved of funding.

Jeremy Hunt has insisted that the NHS is receiving generous funding increases, even going so far as claiming that the rise in funding in 2016/17 is the "sixth-biggest" in the history of the NHS. However, this was de-bunked by economists at The Health Foundation and The Kings Fund. Prof John Appleby, the Kings fund’s chief economist, and Adam Roberts, of the Health Foundation, analysed the last 41 years of funding data, and found that the NHS real spend increase of 1.6% is the 28th-largest increase since 1975-76.

In a blog on the King’s Fund website, Appleby and Roberts also note that Hunt's claim that the government are giving the NHS in England an extra £3.8 billion this year is untrue with the true figure being just £1.8 billion.

Widespread deficits

The effects have been particularly noticeable in the NHS provider sector (NHS trusts and foundation trusts): in the third quarter of the 2015/2016 financial year the NHS provider sector reported a combined deficit of almost £2.3 billion and this is projected to reach £2.8 billion by the end of the financial year (April 2016).

This dire financial situation encompasses the entire NHS provider sector in England; it is not limited to any particular geographical area or type of trust. According to a March 2016 report by the think tank The Health Foundation  – “[the deficit] is a systemic issue, with nearly half of trusts reporting a deficit in 2014/15, and over three-quarters in deficit by quarter three of 2015/16.”

Yet just two and a half years earlier in the 2012/2013 financial year the NHS provider sector reported a surplus of £577 million.

The deficit is also not confined to NHS trusts; although the situation is not as severe, clinical commissioning groups (CCGs) are beginning to fall into deficit. In the financial year 2014/2015 19 CCGs reported deficits, but by February 2016 it was predicted that this will have increased to 30 CCGs by the end of the financial year 2015/2016 with a combined deficit of £0.5 billion.

No plan for black hole in finances

From 2015/16 to 2020/21 the government plans to add £8 billion to the NHS’s budget, however at the same time the NHS must find efficiency savings of £22 billion. Parliament’s own spending watchdog, the Public Accounts Committee, has noticed that the sums just do not add up: the NHS is unlikely to be able to find these £22 billion in savings and there will be a “black hole” in its finances by 2020/21.

In  March 2016 the PAC reported that the NHS in England did not have a convincing plan to fill a projected £22 billion “black hole” in its finances by 2020/2021. The report noted the “serious and persistent financial distress” that some acute trusts are in, that deficits were “spiralling” and the current payment system is “not fit for purpose”.

Meg Hillier, the chair of the committee, said the government had done little to support trusts facing financial problems: “Without urgent action to put struggling trusts on a firmer financial footing there is further serious risk to services and the public purse.”

The report also noted that the targets for 4% efficiency savings set by Monitor and NHS England were “unrealistic and have caused long-term damage to trusts’ finances”.

Falling behind our neighbours

The government’s inadequate funding for healthcare means that the UK is falling behind other countries in terms of investment in health as a proportion of GDP, according to research by The Kings Fund published in March 2016.

The UK’s GDP is forecast to grow in real terms by 15.2% between 2014/2015 and 2020/21, however spending on the NHS is set to grow by just 0.9% per year. As a result spending on the NHS as a proportion of GDP will fall to just 6.6% compared to 7.3% in 2014/2015. The Kings Fund notes that if spending on the NHS grew in line with the economy, by 2020/21 the NHS would be spending £16 billion more than planned. The UK has fallen significantly behind many other European countries in terms of health funding; the UK is now 13th out of the original 15 EU members in terms of investment.

Prof John Appleby, lead economist at the Kings Fund, noted in a Guardian article covering the research that “the government’s decision to increase the NHS’s budget by far less than the anticipated growth in GDP meant the service would miss out on what would have been an extra £16 billion by 2020.”

Appleby warned in the article “that Britain’s status as an increasingly “low spender” might mean the NHS cannot deliver improvements in the quality of care and outcomes from treatment that patients want.” The Kings Fund’s figures really highlight that the government’s claims that it is giving the NHS generous financial settlements is not true.

Quality of care falling

The underfunding of the NHS is reflected not just in the increasing deficits within the organisation, but also in a marked deterioration in quality of care. Services are being reduced or cut and rationing is widespread.

In November 2015, the Healthcare Financial Management Association’s (HFMA) warned that the underfunding would lead to a reduction in quality of care.  The HFMA reiterated its warning on quality of care in a Guardian article in March 2016 “Six months ago finance directors were relatively confident quality standards could be maintained despite the pessimistic outlook – at least for the remainder of this financial year – but the situation has gone from bad to worse in the meantime,” said Paul Briddock, HFMA policy director, “It’s clear from the new figures that the unprecedented pressure to meet financial targets is taking its toll.”

In February 2016 the The Kings Fund published its regular quarterly monitoring report a survey of NHS finance directors: for the first time since the survey began in 2011, over half of the trust finance directors reported that quality of care in their area had got worse in the past year. Furthermore, nearly 50% of finance leads in clinical commissioning groups (CCGs) also reported a worsening of quality of care in their local area.