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On July 8th 2015 the Chancellor of the Exchequer confirmed his Government’s commitment to provide additional funding for the NHS however there was little if any mention of social care funding, suggesting that no new money will be forthcoming for social care unless it’s found from the healthcare budget. If you then factor in the budget announcement of at least four more years of pay restraint for NHS staff, which will inevitably affect recruitment and retention and likely increase the need for more expensive temporary staff, the financial challenges facing the NHS remain enormous. This week’s blog looks at some of the immediate implications of the 2015 budget in relation to health and social care in 2015-16. 

What this means for the NHS
The Chancellor, in confirming the government’s commitment to support the NHS Five Year Forward View, which he referred to as the "Stevens Plan", announced that by 2020 spending on the NHS would increase by £8 billion on top of the £2 billion already promised for 2015-16 (a total increase of £10 billion by 2020-21 on the £114 billion spent in 2014-15). However he also noted that there will be a need for very challenging efficiency and productivity savings to meet the remaining £22 billion funding gap that is expected to arise in 2020 if new ways of working and other improvements are not delivered.

While the additional funding is undoubtedly a welcome commitment, the efficiency improvements needed to bridge the funding gap is the equivalent of year on year efficiency savings of 2-3 per cent. When compared to the past five years where the NHS improved productivity by only 0.8 per cent a year in real terms, this looks incredibly challenging. Moreover, while the NHS coped reasonably well for the first three years of the coalition government, the past two years and, in particular 2014-15, saw NHS providers overspending their budgets by £823 million.

The position in the acute sector, in particular, deteriorated sharply, with two-thirds of acute trusts in deficit at the end of the year; largely as a result of year-on-year reductions in the tariff, the recruitment of significant numbers of new nurses and increasing reliance on expensive agency staff to meet the recommendations of the Francis report. To avoid a departmental budget overspend, significant additional funding was made available in-year, including £640 million from capital budgets and £250 million in additional funding from the Treasury. However, rescues of this nature are unlikely to be available in future years.

Indeed, the Secretary of State for Health has warned the NHS that they will not receive any further funding increases in 2015-16 above the £116 million already committed and that savings are expected to be found from reductions in spending on agency staff, management consultancy and pay of senior managers. Unsurprisingly, the King’s Fund has suggested that 2015-16 is likely to be the “most challenging” year in the recent history of the health service. For example, two-thirds of trusts are forecasting a deficit in 2015-16, a figure that rises to almost 90 per cent among acute trusts.i

Furthermore, the relentless workload pressures on staff in the face of five years of pay restraints have resulted in serious reductions in staff morale. The Budget announcement of four more years of public sector pay restraints can only exacerbate this situation.

What it means for social care

Significant year-on-year reductions in financial support for local authorities have led to real-term cuts in spending on adult social care of some 8.7 per cent between 2010-11 and 2014-15 at a time when demographic pressures mean that the cost of providing care for older and disabled people is increasing by three per cent a year. This has resulted in a reduction of more than a million people being allowed access to publicly funded social care.

The 2015 annual budget survey from the Association of Directors of Adult Social Services (ADASS), suggests a further £420 million in service reductions this year. With thousands of people and their families struggling to meet the costs of the care and support they need; this has led to increasing pressure on the NHS in terms of large increases in emergency admissions and delayed discharges from hospital. Illustrating quite starkly the interdependency of the two sectors. Estimates suggest a potential funding gap in social care of more than £4 billion by 2020/21.ii Further retrenchment and restrictions seem likely, and importantly there is already evidence of social care providers exiting the care sector, which will put even further strain on remaining services.

While the implementation of the Better Care Fund, which commenced in April 2015, is seen by some as part of the solution, the financial challenges facing both sectors suggest the compulsory pooling of significant amounts of funding when budgets are already under huge strain, will only add to the pressures facing both NHS and social care providers.

Our report, better care for frail older people, identified irrefutable evidence that health and social care are inextricably linked with cuts in one impacting on the other. This suggests that the welcome news of additional funding for the NHS will be more than offset by the impact of cuts in social care. Furthermore, the chances of achieving the necessary NHS productivity improvements in 2015-16 are looking more and more challenging. Furthermore, as 70 per cent of NHS spending goes on staff, balancing NHS budgets will inevitably require headcount reductions, including among clinical staff, at a time when other evidence suggests more, not less, staff are needed. This conundrum suggests that there is an increasing risk of compromising patient safety and the quality of care. Trusts now face the dilemma of patient care suffering as staff numbers reduce due to cuts of people leaving in response to pay freezes, which could lead to increased waiting times and deterioration in the quality of care. The alternative is that the NHS budget will simply be overspent.

Pete_professional

Karen Taylor - Director, UK Centre for Health Solutions

Karen is the Research Director of the Centre for Health Solutions. She supports the Healthcare and Life Sciences practice by driving independent and objective business research and analysis into key industry challenges and associated solutions; generating evidence based insights and points of view on issues from pharmaceuticals and technology innovation to healthcare management and reform.

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ittp://www.kingsfund.org.uk/sites/files/kf/field/field_publication_file/Budget%20briefing%20July%202015%20final_0.pdf 
iiAssociation of Directors of Adult Social Services (2015). ADASS budget survey 2015 [online]. Available at: www.adass.org.uk/full-report-adass-budget-survey-2015/ (accessed on 1 July 2015).

 

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