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NHS Will Struggle Even After May’s Extra Cash Pledge

Yesterday the Prime Minister announced a suite of changes to NHS funding in her speech. While the proposed spending increases are to be welcomed, they remain inadequate in the face of the challenges our health service faces.

Background

Theresa May set the scene by claiming the government had to make difficult decisions about public spending cuts in light of the deficit that Labour left. This is bogus; invoking the ‘austerity delusion’ over and over again isn’t enough to make it true. Implicitly blaming the Labour government of 2010 for the current pressures on the NHS isn’t totally unexpected, but it is intellectually dishonest.

The PM then claimed that health spending had been “protected and prioritised” in the process of these cuts. While no cuts to health spending were made per se, the average increase in health spending since 2010 of 1.4% per year (0.1% if adjusted for population growth and ageing - £paywall) has been lower than at any point in the NHS’s history.

May recognised that these historically low increases in health spending were at odds with the increasing pressures on the NHS. Besides population growth and ageing, she highlighted that as we become wealthier, live longer and make more medical advancements, it makes sense to spend more on health spending, and so growth in this should outstrip overall economic growth.

This is all very well and good, but she did fail to mention her own party’s austerity experiment as a key driver of pressures on the NHS. It is well documented that the cuts of around 10% to social care (£paywall) since 2010, for example, have increased the burden on our health service.

Similarly, the Prime Minister argued that certain aspects of modernity - the  increased encroachment of the Internet in our everyday lives, for example - might have negative implications for our mental health and levels of loneliness in our society. Fair enough. But you would also expect a 169% rise in homelessness over 8 years to show up in mental health statistics. Aggressive cuts to local council budgets have led to the closure of many community service programmes, including up to 1,000 Sure Start centres.

Meanwhile, the recent slowdown in the UK’s life expectancy growth rates has marked it out as an anomaly in Western Europe, with public health researchers fearing that inadequate health and social care spending is the cause. Other researchers writing for the British Medical Journal have linked 120,000 excess deaths to the squeeze on public finances since 2010.

Proposed spending increases

The government plans to increase NHS England funding by an average of 3.4% in real terms each year between 2019-20 and 2023-24, with an additional £1.25bn allocated to ease pressure on pensions. This means that by 2023-24, NHS England’s budget will be £20.5bn higher in real terms, or £394m a week.

Note that these increases would only apply to the NHS England budget, and represent a smaller 2.9% annual increase (£paywall) in the Department for Health budget for England as a whole. Spending that falls outside of the NHS England budget includes training medical staff, buying hospital equipment and preventative services.

Under these plans, annual spending growth would still be lower than the historical average and insufficient to meet health service targets. The Institute for Fiscal Studies, writing with the Health Foundation and NHS Confederation, has calculated that we would need average spending increases of around 4% each year in health spending to see improvements, with 5% annual increases in the short term to address immediate funding gaps. This would have to be in addition to increased social care spending, which isn’t forthcoming on the scale necessary.

Funding

Astonishingly, the Prime Minister still made reference to a ‘Brexit dividend’ when it came to the question of funding these increases. This is nothing more than an attempt to pander to her party’s arch-Brexiters.  It is as if the hoo-ha around the Brexit bus - which the head of the UK Statistics Authority called a ‘clear misuse of official statistics’ - never happened.

In the event that Brexit does not deliver manna unto us, the PM said that the increase would be funded by a ‘fair and balanced’ rise in taxes. PEF Council member Richard Murphy has argued that either creating money or letting more people save with the government (by issuing more government bonds) represent superior funding strategies.

This account leaves out the worst possible option - it could draw money from other areas of public spending. May’s government have done it before; the £400m it promised to replace combustible cladding after the Grenfell fire was, incredibly, taken from the Affordable Homes Programme’s budget. We ought to be wary of similar tactics in the future.

We should also question the government’s understanding of “fair”. In 2010, then Chancellor George Osborne insisted that those with the “broadest shoulders should bear the greatest burden”, a commitment adopted by his successor Philip Hammond. Yet austerity has disproportionately hurt the poorest households, while disabled people, women and ethnic minorities have borne an unfair share of the burden.

Any tax increases to fund the NHS should be paid by those who can truly afford to. A tax on wealth might be the fairest option, and it’s a proposal gaining support from across the political spectrum. Hopefully this support will translate into policy soon enough.

Conclusion

The funding increases announced by Theresa May are a welcome step in the right direction, but without a bolder strategy our health service will continue to struggle. We must also make sure that the necessary funding isn’t drawn either from other areas of public spending or from the budgets of poorer households.

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