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by Edward Jones 10th April, 2018
3 min read

A New Deal for NHS funding? The Prime Minister hovers over the spending taps

The Prime Minister has revealed that she is considering a “multiyear” funding settlement for the NHS. Speaking to the House of Commons Liaison Committee, Theresa May acknowledged “serious cost and demand pressures” on the health service and stated that proposals would be drawn up within a matter of months to secure more funding. To NHS providers, staff and suppliers struggling after years of financial constraints, this will be welcome news. The Cabinet now has to decide where the money will come from.

The announcement of a long-term funding settlement is well timed.

Health Education England is developing its first Workforce Strategy for the NHS in England. As GK Strategy’s own research has shown, demand from Eastern European workers for jobs in the UK dropped by a third last year after the EU referendum result. This underlines the need for additional NHS funding to train more homegrown staff. Whilst the Government will recruit an extra 1,500 medical students over the next two years, the Department of Health and Social Care (DHSC) is keen to fund further domestic medical student places.

Alongside the health workforce, the Department is also drafting a Social Care Green Paper, which aims to set out a strategy which would relieve pressure on NHS in-patient services. Meanwhile, the NHS’s Five Year Forward View, its flagship strategy for coping with rising demand, is set to be renewed next year. A plan to fund all these multi-year policies is the last piece of the jigsaw.

The Prime Minister’s comments follow growing momentum for a new funding settlement for the NHS, after years of austerity relative to demand growth.  Shortly before May’s remarks, 98 MPs, including the Chairs of 21 select committees, wrote to her urging the Government to set up a Parliamentary Commission on the long-term funding of the NHS and social care. The Commission would look at whether additional taxes, including a ring-fenced levy for health and social care, could put NHS funding on a more sustainable footing.

Her comments come after Jeremy Hunt last weekend called for a ten-year funding deal for the NHS. Emboldened by facing down the Prime Minister’s efforts to move him to another department, Hunt broke ranks with the Cabinet to call for “innovative models of taxation” to pay for the NHS.

A ring-fenced tax looks like Hunt’s preferred funding approach. Such an approach has also been endorsed by NHS Manager’s Roy Lilley as a practical means of breaking the deadlock on NHS funding.

However, the idea of a ring-fenced tax has come in for criticism from both the well-respected Institute for Fiscal Studies and health think-tank the King’s Fund due to concerns over its sustainability, as it would the make the NHS more vulnerable to economic downturns shrinking tax receipts. More significantly, as Jeremy Hunt himself cautioned when raising the idea of such a tax, opposition will come from the Treasury as such a tax “takes it [power] out of their hands.”

A ring-fenced tax, which is popular with the public, is the only politically conceivable way for the Conservatives to significantly increase NHS funding without busting borrowing targets. The obstacle to the hypothecated tax, as Hunt correctly pointed out, sits with the Treasury which is institutionally hostile to the idea of fundraising mechanisms it can’t control.

If the Treasury blocks it, the hype around the new funding deal could be no more than that.  Yet if Theresa May and a majority of her Cabinet warm to the idea, it could still become a reality and turn the tide of NHS financial decline. The Prime Minister’s hand is hovering over the spending tap – her decision could be sink or swim for providers.

For further information on NHS funding and how this may affect your organisation, please contact edward@gkstrategy.com for further information.

See more articles by Edward Jones