Ahead of next week’s budget announcement Michael Trickey looks at what complexities lie ahead for funding the NHS in Wales.
Yesterday’s highly significant report by The Health Foundation, The path to sustainability: financial projections for NHS Wales, offers some encouraging news about long-term prospects for sustaining our NHS but a warning of the significant challenge over the next 3 – 4 years.
The good (ish) news is the think-tank’s view that long-term fiscal sustainability (ie to 2030) may be achievable although there is a big ‘but’.
This long-term assessment depends on continuing efficiency gains year-on-year and spending on health increasing in line with growth in the UK’s economy as measured by GDP. This is consistent with long-term historic trends but a recent, and not much noticed, report from the Office for Budget Responsibility reminds us that, on current economic forecasts, UK health spending is on track to fall as a percentage of GDP by 2019-20. If the NHS in Wales (and the UK) is to cope with rising demographic and cost pressures, there has to be a big shift in UK policy on public spending.
The Chancellor has talked of resetting fiscal policy in his November Autumn Statement but his comments so far have focussed on capital spending on infrastructure rather than day-to-day spending on services. The Health Foundation report concludes that, if funding mirrors current UK spending plans for the English NHS, the NHS in Wales could face a ‘funding gap’ between available finances and cost pressures of about £700 million by 2019-20 – a shortfall of over 10%.
Wales could decide to improve the ‘UK offer’ and increase NHS funding at a higher rate. Next week’s draft Welsh budget for 2017-18 will provide an indication. But there is a sting in the tail. As pointed out in the recent Institute for Fiscal Studies report (under the Wales Public Services 2025 programme), the biggest future impact of current UK spending plans on the Welsh budget will be in 2018-19 and 2019-20 rather than next year. Its projections indicate that protecting the NHS budget over the next three years could mean real terms cuts in other services averaging 7.4 % or more. But the Health Foundation argues that, for example, NHS sustainability depends on funding for adult social care rising by over 4% a year in real terms. As it says, the NHS in not an island.
The budget choices look set to become increasingly difficult – even without the Brexit uncertainties. Wales has pursued a more balanced approach to public service austerity than in England. As the Health Foundation makes clear, funding cannot be the only answer to NHS sustainability. Managing the demand for acute care, prevention and better treatment of chronic conditions, developing new approaches to how care is provided, taking the fullest opportunity of Prudent Healthcare to improve value for money and a range of other actions are all essential to long-term sustainability. And so is the drive to improve efficiency.
The Wales Public Services 2025 programme, working with the Public Policy Institute for Wales, has been exploring with senior NHS staff and Welsh Government officials the scope for building on what has already been achieved to further improve efficiency . Drawing on The Health Foundation figure, around £100 million additional efficiencies every year are needed over the next few years – £0.5 billion over five years. This is going to require a substantial all-Wales programme.
The Health Foundation report offers a route map to a sustainable NHS in Wales – but it will not happen by default. There are examples of service change and innovation right across the NHS in Wales and other care providers – but it is not just a matter of knowing what change is required. The challenge is translating this into the pace and scale of change on the ground that will be necessary.