It’s how you tell it, if at all

– ‘efficiency savings’ or ‘budget cuts’ in Health and Social Care!

By stewartb

This is prompted by learning of the revisions, including ‘cuts’, to public spending in Scotland announced recently in the Scottish Parliament by John Swinney. 

One of the more politically sensitive aspects for the Scottish Government is the decision to vire funds away from certain health service budget lines in order to offer a decent pay rise to NHS Scotland staff. This brings me to the main purpose of this blog post, namely to look at actions being taken by the Westminster government on health and social care funding in England. Unlike the media and opposition parties’ responses to Mr Swinney’s announcement, the Tory government’s actions on England’s health and social care budget seem to get little or no attention.

What follows draws on a report from the National Audit Office: NAO (14 October, 2022) Introducing Integrated Care Systems: joining up local services to improve health outcomes.  Report by the Comptroller and Auditor General.

(https://www.nao.org.uk/wp-content/uploads/2022/10/Integrated-Care-Systems-Funding-and-accountability-for-local-health-and-care.pdf  )

In this the latest iteration of Tory reorganisation of health and social care in England – who can recall the brave new world of Andrew Lansley’s marketisation reforms introduced by the first Cameron government? – so called ‘Integrated Care Systems’ (ICSs) bring together NHS, local government and other partner organisations to plan and deliver integrated services to improve the health of local populations.

The ICSs have been established following the Health and Care Act 2022. There are 42 in total, covering the whole of England. Each can include diverse organisations: hospitals, GPs, local authorities, social care services, primary care providers, and independent and voluntary sector providers.

The NAO provides this background information about the ISCs and the Boards that manage them:

• £113 billion is the Integrated Care Boards’ (ICBs’) total financial allocation from the Westminster Government for the year 2022-23
  • ‘In our survey of senior ICS staff, 57% (172 of 298 responses) expect it will take between three and ten years for their ICS to significantly improve outcomes in population health and healthcare’
  • looking at the Westminster government’s plans for monitoring and evaluation of the new ISCs initiative: ‘… it is less clear who will monitor whether integration between the NHS, local government, and others is working well, or what will happen if it is not.’ (That hardly inspires confidence!)

And now to budget cuts, sorry ‘savings’! According to the NAO, to meet balanced budget requirements in the immediate future, within ICSs, ‘provider trusts have an average savings target of 3.7%, but for one provider it is as high as 10.4%. ICSs must make savings of £5.7 billion to balance the books and then maintain this lower level of spending. Of this £5.7 billion, ICSs have identified £3.7 billion in recurrent savings which they expect to maintain year-on-year. However, the remaining £2 billion savings are non-recurrent, one-off savings, and alternatives must be found to replace them next year.’

Longer term under resourcing

The NAO exposes the pre-pandemic state of under resourcing of health and social care by the Westminster government:

Para 2.8: ‘NHS trusts bridged the gap between income and expenditure with top-up loans from DHSC (Department for Health and Social Care). Between 2015-16 and 2019-20, the loan balance of NHS trusts increased from £5 billion to £16 billion, of which £13 billion related to interim loans mainly used for day-to-day expenditure.’

Para 2.9: ‘We (the NAO) previously noted the loan system was not fit for purpose and unsustainable because trusts’ deficits prevented them from repaying the money they owed. In April 2020, a £13.4 billion balance of interim loans owed by NHS trusts was written-off by DHSC. The loans were converted into £13.4 billion of public dividend capital (PDC), which trusts do not have to repay.’

So NHS England trusts that had been under resourced by the Westminster government and as a result had built up large financial deficits were provided with loans by said government that the trusts subsequently were unable to repay. And so these debts – of £13.4 billion were (just) written-off by the lender, the Westminster government!  A neat process: I wonder if it has been available to the NHS in NI, Scotland and Wales too?

Looking to the financial management plans for NHS England in 2022-23, the NAO notes:

Para 2.17:  ‘In March 2022, government set the NHS an efficiency target of 2.2%, but to agree balanced budgets, ICSs have had to identify much larger spending reductions. These range from 2.7% to 9.6%, with an average of 5%. ..’

Para 2.20:  ’…. in total, ICBs are planning to save £5,671 million (£1,674 million of ICB savings,
plus £4,185 million provider savings, less £188 million of ICB savings made through providers in their area, which would otherwise be double-counted). This is equivalent to 5% of their total budget for 2022-23.’

Savings, efficiency savings of £5.7 billion in 2022-23 – aka budget cuts imposed by the Tory government! Anyone spot a headline telling the public about this?

Local government in England – a key partner in the ISCs

From para 2.35 of the NAO report: ‘Local authorities continue to face significant financial pressures. The government has reduced funding for local authorities since 2010 and their spending power declined by 26% between 2010-11 and 2020-21. While council tax has increased substantially in real terms since 2016-17, if its effects are removed, local authority spending power funded by government fell by more than 50% between 2010-11 and 2020-21 in real terms. DHSC provides local authorities with the public health grant, an amount ringfenced for spending on public health areas. However, analysis by The King’s Fund shows public health spending also fell in real terms by 15% between 2013-14 and 2019-20.’

It’s worth noting the shift away from direct central government funding of local authorities in England. The graph (Figure 14) from the NAO report reveals substantial change over time. Such a change must have fed into Barnett formula-calculated funding for Scotland as local government is devolved.

More fundamental change on the way

The NAO highlights planned changes to NHS England:

Para 17: ‘NHSE has set out its ambition to significantly reduce its size, in part to give ICSs “space to lead”. It is still in the process of determining the operating model and ways of working that will allow it to do so. NHSE, Health Education England, and NHS Digital will merge into a single body by April 2023.

‘In July 2022, NHSE announced that the successor body would have a headcount 30% to 40% lower than the current headcount of these organisations by the time it completes the transition in April 2024.

‘The rationale for the change was partly to reverse the temporary expansion of NHSE in response to the COVID-19 pandemic, and partly in response to the creation of ICSs, which it considered needed “space to lead”. As part of the restructure, NHSE says it will focus on enabling and supporting change and empowering systems to lead locally, and simplify how it works internally and with the wider NHS. It expects to develop its plans by late autumn 2022 and implement the changes by the end of March 2024.’

Taken together – (i) the shift in the means of financing local government in England – from central government to council tax payers; (ii) the important obligations of local government to provide services within the new ISCs; and (iii) the planned downsizing of NHS England – these changes would seem to merit close attention for any adverse impacts on future levels of Barnett-calculated funding for NI, Scotland and Wales.

End note

Returning to the recent budget announcement by the Scottish Government, I noted the emphasis Mr Swinney placed on trying to meet, at least in part, the current pay claims of public sector staff in Scotland. Along with many working in the private sector and all those reliant on the social security safety net, they are facing severe cost of living pressures. It would be a huge challenge for any government to meet the personal financial needs and wants of the diverse struggling groups at this time: it is especially ‘challenging’ for a government with severely restricted financial powers. And for context, Mr Swinney and his ministerial colleagues are also faced with the challenges of governing a country, Scotland, that is set within a much larger, constitutionally and politically dominant nation-state which – by the admission of the latter’s own ruling party elite – has long been failing relative to international comparators on the key metrics of productivity and growth.

Around the time of Mr Swinney’s statement, the BBC News website published an article under the headline: ‘No more money to fund public sector pay rises – Swinney’. The BBC quoted Craig Hoy, chair of the Scottish Conservatives. (I trust it misquoted Mr Hoy because his comments don’t make much sense!) We learn that Mr Hoy ‘would not put himself in Mr Swinney’s shoes’, but he believed the choices he had made were the ‘wrong priorities’. Hoy said: “I would support fair pay settlements in public sector in same way I would support a fair taxation system”. And then the odd bit:  “We have to recognise if we want to maintain our public services and we need to borrow our way through some of the issues we’re seeing, then you can only do that in three ways – tax rises, public spending cuts or greater borrowing or greater growth.”  I’ve read that several times and I’m still puzzled: what is he proposing?

If Mr Hoy considers present priorities to be the wrong ones, what do the Tories in Scotland think are the right ones? Are they again recommending that the Scottish Government apes Westminster’s policies, this time on actual cuts – sorry, ‘efficiency savings’ – in the health and social care budget?