Rishi Sunak’s first Budget was all about contrasts. Between the serious short-term risk to health and prosperity posed by COVID-19 and a very upbeat view of the nation’s prospects beyond the pandemic. Between a Budget speech that emphasised the NHS but largely ignored social care. Between firm plans to increase public spending over the next 5 years but near silence on how the extra spending will ultimately be paid for.
For COVID-19, the Chancellor set aside £5bn of emergency funding for the NHS and other public services as part of an overall £12bn response package. At this stage attempts to accurately calculate the financial impact of the pandemic on hospitals and GP surgeries are almost impossible. The Chancellor did the right thing, committing to foot the NHS’s share of the bill, whatever that turns out to be.
But the big issue for the NHS is not money, it’s capacity. Here the Chancellor announced two other important measures. First, he provided a simple solution to the problem of doctors being hit with punitive tax bills for working extra hours as a result of the tax regime for high earners’ pension contributions. This simple solution is important but will be expensive, with the IFS estimating that government tax receipts will take a hit of £700m a year. The second measure was to change the rules around certifying sickness absence. There’s to be a new system for people to obtain evidence for absence from work via the NHS 111 service, taking pressure away from general practices.
Looking beyond the short term, the Chancellor set the financial envelope for this year’s Spending Review. The Spending Review is the moment where political intent meets the hard reality of tough choices and trade-offs, the results of which will be announced in July. The Chancellor is planning a big increase in public spending that will rise in real terms by £76bn over the next 5 years. The NHS is set to take a big share of this increase.
But even if the NHS continues to get the biggest share of the public spending pot, the sad reality is that it doesn’t often feel that way on the frontline. Demand and cost pressures are projected to rise faster than planned funding increases. The government’s manifesto commitment to 40 new hospital building schemes is welcome but comes on the back of many years in which health care capital investment has fallen well short of comparable countries. The result is a maintenance backlog of £6.5bn, too few MRI and CT scanners and an IT infrastructure that is not fit for purpose. 40 new hospitals is a start but it won’t solve the many other long-term challenges facing the NHS. Beyond buildings and equipment, funding is needed to train more nurses and doctors to deliver the capacity we need.
Spending per head on public health has fallen by a quarter in real terms over the last 5 years – a cost-saving measure that isn’t in the interest of population health and has no economic logic. Research shows that at the margin spending on public health measures is at least three times as productive as spending on treatment: an ounce of prevention really is worth a pound of cure. It makes no sense to be devoting a declining share of the nation’s health budget to public health. Improvements in life expectancy in England have stalled, those in deprived areas face the greatest burden of ill health and the North/South divide is widening. For a government that has made ‘levelling up’ a key plank of its policy agenda, investing in public health should be a key priority.
The Chancellor said that this is a government ‘that gets things done’ and the Prime Minister has consistently promised to get social care done. The Budget did nothing for social care in the medium term. That may be understandable given the context, but social care must be on the Chancellor’s to do list for July’s Spending Review, where the reality of tough choices will really start to bite. The IFS’s analysis of the spending review figures shows that while public spending is growing, once you factor in the pre-existing spending commitments for the NHS, schools, defence and overseas aid, there is still further austerity ‘baked in’. Sorting social care will require significant increases in public spending.
This is where the thorny issue of how to pay for necessary increases in public spending raises its head. The OBR’s fiscal projections show spending pressures from the NHS and social care system aren’t going away. To meet these pressures the economy needs to grow at a much higher rate than currently forecast – growth is currently projected to be less than 2% a year for the next 5 years – and ultimately taxes will have to rise. There is to be a second Budget later this year; if March’s Budget was the good news on spending, will the Autumn Budget focus on how to pay for it?