The much-hyped independent investigation into the National Health Service by Lord Darzi was released on Thursday. It confirms what has long been obvious to anyone who has tried to schedule an appointment or procedure, but offers little beyond the same tired lines on austerity and recycled reforms that have been promised many times before.
The claim that the NHS has endured austerity is simply untrue. Spending on the NHS has matched or exceeded inflation on every measure. As the report itself states, real terms spending grew by 1% a year until 2018 and then just under 3% per year from 2019 to 2023. This means that in every single instance, the previous budget was not just maintained but saw an increase equivalent to inflation, plus another 1-3% extra on top of that.
What is meant by ‘austerity’ is spending not rising as much as in past decades: an entirely arbitrary expectation. If the NHS grew at 3.4% (the rate needed to avoid so-called ‘austerity’) while the economy grows at 0.7% (forecast for 2024), by 2099 the NHS would be more than half the entire economy. For every office building there would need to be a hospital, for every shop a GP clinic – an absurd notion.
A more reasonable measure is whether spending has matched changes in population size and demographic structure. On this, the report finds real terms spending has been maintained, even as these trends will have had a negative impact on public finances overall. An ageing population means more work for the NHS, but it also means the state spends more on pensions while receiving less income tax.
Yet more money has still been found for the NHS, mainly by increasing the tax burden – set to reach an 80-year high by 2028-29. Why, then, is the NHS still in such a sorry state? The report points to a lack of capital investment that has reduced productivity. Despite spending more overall, capital budgets have been ‘repeatedly raided to plug holes in day-to-day spending’, resulting in crumbling buildings and outdated equipment that makes it harder for doctors and nurses to do their jobs.
However, it stops short of explaining why day-to-day spending has increased so significantly, despite overall funding exceeding inflation. If we look at NHS provider accounts, staff costs are by far the largest part of operating expenses, 65% in 2022-23. This rose from £50 billion in 2016-17 to £79bn in 2022-23, a 58% increase in just 6 years, more than twice inflation during that period, 27%. Recent figures show the NHS is the largest it has ever been since at least 1991 with a headcount of 2 million, up 30% from a decade ago.
This has been exacerbated by above inflation pay rises. From 2013 to 2023, band 5 NHS workers have seen a 27% real terms increase, 65% if they have been promoted. This is a double whammy for the NHS which has to both pay for more staff and pay staff more.
Yet the report does not address any of this. The words ‘wages’ and ‘pay’ appear just twice – ‘pensions’ just once, compared to ‘capital’ (68 times), ‘productivity’ (62 times), and ‘investment’ (43 times). Anyone can point out areas for more capital spending, but at the end of the day, unless cuts are found in day-to-day expenditure, this is all theoretical.
It is telling that despite finding ‘too great a share’ of the NHS budget is spent on hospitals, and that the number of clinicians in hospitals have been driven up to ‘unprecedented levels’ due to institutions that are ‘not fit for purpose’, the report does not include cuts in these areas as a major theme of the 10 year health plan.
In reality, without cuts to day-to-day expenditure, every additional pound of capital spending is either a pound less for other departments like prisons and education, or a pound out of the pockets of taxpayers who are already facing a record high tax burden.
The proposed reforms – moving to a digital NHS, shifting care to communities, and moving from sickness to prevention – have all been promised before. The NHS has committed to shifting care towards the community since at least 2006, while the Department of Health published a digital strategy as far back as 2012.
Failure to accomplish these was not for lack of trying. Rather, it has been because successive governments have preferred to take the easy way out. Keir Starmer recently said ‘no more money without reform’, but earlier this year, his Government approved a 22% pay rise for doctors. It is easier to give unions what they want to avoid messy and unpopular strikes today, even if this means a worse situation tomorrow.
This is a vicious cycle. More day-to-day spending means less for capital investment, causing outcomes to deteriorate and even greater demand for day-to-day spending. To break the cycle, the Government must first rein in day-to-day spending. With public finances already in peril, the NHS cannot afford politicians peddling the fantasy that greater investment is possible without sacrifices elsewhere.
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