Here’s how the NHS’s Covid-stressed finances can be addressed

The writer is chief executive of NHS Providers

The NHS is still dealing with pressures never experienced before in its 72-year history. But, as we saw this week in draft legislation, thoughts are turning to a future health service that is more integrated with local partners and better placed to deal with the demands of an ageing population with complex health conditions. As part of this, attention will need to return to NHS finances. It’s a difficult picture.

Long before the pandemic, in June 2018, the government committed to a welcome increase in core NHS revenue funding by an average 3.4 per cent a year to 2023/4 in real terms.

This rise followed the deepest and longest financial squeeze in NHS history — with only 1.4 per cent funding growth a year between 2009 and 2019. But it was never a bonanza. It actually returned NHS funding to below the 4 per cent average annual rate of increase between its creation in 1948 and 2010.

The NHS Long Term Plan, launched in January 2019, set out a range of outcomes for the extra investment and the plan must remain at the heart of the contract between the NHS and taxpayers funding the increase.

However, two crucial elements were missing from it: multiyear capital and training budgets. Certainty over capital and workforce funding is now even more pressing given that this government was elected in 2019 on a manifesto that promised 40 new hospitals by 2030 and 50,000 extra nurses and 50m more patient appointments with GPs by 2025. Given the length of building and training pipelines, none of these commitments can be met without clear multiyear settlements.

Covid-19 has further complicated the picture by adding a huge raft of costs, both short and long term. There is a backlog of elective surgery cases that will take several years to clear. Demand for mental health services has increased rapidly and there’s a whole new set of patients with long Covid whose care needs to be funded.

Underlying this is a requirement to configure the NHS to cope with Covid-19 long term. An annual Covid vaccination campaign will require a much more sustainable workforce model than there is now; a permanent test, trace and isolate service to combat virus mutations; and extra capacity investment in light of tighter infection controls. The NHS also needs to build in more resilience to deal with surges in demand without having to ask frontline staff to do the impossible day after day.

And this, of course, is all before social care reform that the pandemic has shown we cannot delay any longer.

How should the government respond? Prioritisation will be key. To start tackling elective waiting lists and extra mental health demand, the government has committed an extra one-off £1.5bn for 2021/22. This is a helpful start.

The NHS will need to play its part as soon as coronavirus allows. It will have to make the NHS pound stretch further as we move towards greater collaboration between health and care envisaged in this week’s white paper.

But there is another remedy that would help: a pragmatic approach to the core NHS revenue budget between now and 2023/24, the last year covered by the June 2018 funding commitment.

With the extra Covid-19 costs, NHS spending has increased significantly over the 2020/21 financial year. Spending will now be much closer to what was intended for 2023/24, than the original 2021/22 budget.

It makes little sense to allow the core budget to fall back over the next two financial years, only to build it back up again to existing 2023/24 commitments. Maintaining higher levels of spending over the next three years would not bake in a higher long-term funding increase, as that for 2023/24 would remain as planned.

There is a lot of work needed to fill in the details of this approach. But it would be a sensible way of enabling the NHS to provide the care it needs as we come out of the worst of the pandemic and learn to live with it.

The NHS and its staff have done amazing things over the past year. The service deserves, and requires, a pragmatic approach to its funding model to carry on delivering the care our nation needs.