Can the NHS survive in the long-term?


The latest financial figures for NHS providers reveal a combined deficit of £827m. However, the underlying deficit is estimated to stand at £5bn. The financial situation for the provider sector has consistently deteriorated in recent years as demand for services continues to grow.

Core drivers of deficit among the trusts are based in the acute sector. funding mechanisms for A&E services are flagged as a significant factor. There is also evidence of years of underinvestment in community services, gender identity services and crisis home treatment teams. Sexual health and health visiting services are also under immense pressure from local authority cuts.

The Long Term Plan of 2019 set out a trajectory for the number of trusts in deficit to be halved in 2019/20, the whole sector to be in balance by 2020/21 and no providers in deficit by 2023/24. In order to achieve this, the provider sector will need to make savings and efficiencies of over £3bn a year in addition to the £20.5bn government funding.

Time and time again NHS Providers have outlined this rate of cost reduction as unsustainable. The efficiencies that have largest impacts on savings with least impact on service delivery have already been made. This means trusts could be forced to make non-recurrent savings in the form of delayed maintenance work, staff vacancy freezes or delayed investment into necessary service transformation.

A January 2019 report by the National Audit Office on NHS financial sustainability concluded that:

“the growth in waiting lists, the slippage in waiting times and the existence of substantial deficits in some parts of the system, offset by surpluses elsewhere, do not add up to a picture that we could describe as sustainable.”

The NHS financial management and sustainability report for 2018/19 also concluded that trusts are increasingly dependent on short-term measures to meet financial targets. 31% of savings were one-off in 2018/19, up from 26% in the previous year.

On the Provider Sustainability Fund (formerly the Sustainability and Transformation Fund) there were increased levels of variation in trust performance. This was due to payments being conditional on delivery of control totals. In 2018/19, only 38% of such payments actually helped trusts to reduce or eliminate their deficits – down from 46% in 2017/18.

Financially struggling trusts are increasingly relying on short-term loans from the DHSC with little to no prospect of paying them back. This is another unsustainable approach to financial management of major public bodies.

The report outlines a number of other conclusions surrounding fiscal sustainability of the NHS. It suggests that the NHS Long Term Plan has built of lessons learned from the Five Year Forward View but that the service may still struggle to deliver all its commitments, even with additional money available. Local partnerships and CCGs face substantial challenges and there continues to be a risk that the NHS will be unable to use extra funding optimally due to chronic staffing shortages. There also remains concerns from local NHS bodies that without a funding settlement for social care, efforts to make the NHS sustainable will be futile.

In September 2016 new projections from the Office for Budget Responsibility (OBR) give some idea of just how much money will be needed for the cost of healthcare over the next few decades.

For the first time the OBR projections for the NHS included the effect of ‘other cost pressures’ as well as demographic changes and changes due to income factors (people generally demand more out of healthcare as their incomes rise). ‘Other cost pressures’ are a combination of factors, that include increasing relative health care costs (compared to other sectors of the economy), the impact of advances in technology and the rising prevalence of chronic health conditions.

These updated projections show that we will need to spend more as a percentage of GDP on healthcare over the next few decades - from the current 7.4% to 8.8%-8.9% by 2030/31.  In contrast to other commentators,  John Appleby of the Nuffield Trust, believes this increase is sustainable in the long-term and could be paid for via general taxation.

According to Appleby  this new growth projection in GDP is roughly equivalent to a real increase in health spending of just under £100 billion over the next 15 years - from £139 billion to £237 billion in 2030/31, at 2015/16 prices. The OBR’s projection means an annual real growth of 3.5% to 2030, less than the NHS’s historical average annual growth rate of 3.7% from 1950.

In international terms a rise to 8.8% GDP in 2030 would take the UK up to the level of 2015 healthcare spending in France, the Netherlands, Denmark, Sweden, Germany and Japan. However, as these countries are likely to also increase healthcare spending, the UK would continue to lag behind. Appleby notes that the projections "provide a strong indication that – judged historically and across countries – spending increases are sustainable."

In 2019, the NHS Long Term Plan was launched with commitments and extra £20.5bn by 2023/24 and a ten-year vision to improve NHS care. The plan represents a shift towards early prevention, narrowing health inequalities and moving to integrated, community care.

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Health Foundation chief executive commented on the plan: “Making it [the plan] a reality will be extremely tough given growing pressures on services, widespread staff shortages and continued cuts to other parts of the health and care system.”

The coronavirus pandemic has brought about unique challenges and exacerbated existing issues within the NHS. How the health and social care systems will recover is to be seen but it is clear that long waiting times will continue to be a feature for many years to come. Staffing shortages also continue to be a stark issue that funding plans must address in order to make the NHS sustainable for future generations.