Ansh Barot | The Wilberforce Society | 21st January 2024
Edited by Jessica Alder
The NHS appears to be in a perpetual state of crisis. Skyrocketing waiting lists for hospital treatments, chronic staff and resource shortages and unprecedented rounds of strike action are familiar issues for the British public.
This is partly a result of austerity policies which have allowed the NHS to gradually deteriorate. Whilst NHS spending was ringfenced, it still grew at a relatively low rate of 1.7% per year from 2010-2020 compared to 5.8% from 1996-2010.[1] This was achieved through cuts to capital spending and an overzealous suppression of health workers’ wages (falling on average in real terms by 4.5%).[2] The NHS was left unable to attract or retain sufficient staff to meet immediate patient needs or clear backlogs, especially after demand spiked during the pandemic. Those who remained were placed under excessive workloads and high-stress environments, which further worsened motivation and staff turnover, leaving the NHS unable to fill over 112,000 vacancies.[3]
Sweeping rollbacks to the welfare state have placed an untenable strain on the NHS by weakening population health outcomes. For instance, cuts to social care spending by 31% per person,[4] and local health grants by 20%,[5] have significantly reduced the coverage of community care. Hospitals subsequently struggled to quickly discharge patients who had recovered into care, whilst local authorities lacked resources to maintain general health and limit initial hospital admissions or re-admittances. This was associated with substantial increases in A&E attendance which meant that by 2019, every major unit failed to meet its 4-hour waiting time.[6]The distressing reports of patients dying outside hospitals in queued ambulances are unfortunately not a new phenomenon[7] - its origins lie squarely with the legacy of austerity.
Furthermore, the brunt of austerity has been borne by the least well-off, which has exacerbated health inequalities. For example, punitive benefits reforms such as Work Capability Assessments (WCA) threatened a loss of benefits for the unemployed who were deemed fit to work. WCA was linked to a rise in mental health problems amongst low-income individuals by 279,000, whilst poorer areas with higher reassessment rates suffered disproportionately from an increase in suicide rates.[8] At a national level, mental health spending was cut by 8.25% from 2011-2015.[9] This has forced health services to grapple with a growing mental health crisis (making up 23% of all diseases[10]) on top of a backlog of physical operations delayed by COVID-19.
Paradoxically, throughout this period, both parties espoused strong commitments to ‘reforming’ the NHS to reduce waiting lists and improve the quality of care. COVID-19 and austerity alone do not explain why these reformist agendas have failed so starkly. Since 2010, policymaking has been incoherent, discontinuous, and suffering from excessive short-termism.
NHS Reform and ‘Productivity’ since 2010
The concept of productivity (output per factor input) in healthcare is notoriously difficult to measure. In the UK, healthcare output is measured as a weighted average of the volume of treatments provided, and the total cost of healthcare provision.[11] These results can undervalue productivity since they cannot fully adjust for improvements in the quality of care.
Considering productivity metrics alone can also result in short-term biases. For example, new technologies that deliver the same outcomes with lower costs can initially cause a fall in measured output and productivity, which may reduce the government’s willingness to support important long-term innovations. Also, these models attach no value to the benefits of higher spending to build spare capacity in the system and flexibly tackle any future unexpected increases in demand (such as COVID-19).[12]Therefore, rising health productivity in itself does not equate to a more successful health system.
However, nuances were ignored, and the rhetoric of productivity was adopted by politicians with free-market ideological zeal to justify reforms which brought private sector competitive pressures into healthcare. Andrew Lansley, the architect of the 2012 Health and Social Care Act, summarised this view as follows:
“In reality, we've had more spending, more bureaucracy, more waste and higher costs but without necessary reform nor rising productivity.”[13]
His solution was to create clinical commissioning groups (CCGs) that acquire healthcare contracts from competing NHS and private providers. This sought to incentivise improvements in the quality and scope of provision in primary care, thereby reducing hospital admissions.[14]However, the administrative costs to GPs of procuring contracts reduced their time available to see patients, which they responded to by reducing the thresholds for referral to specialists. This failed to reduce hospital admissions but caused visits to non-hospital specialists to rise 4 times faster.[15]
Whilst this was a poorly designed policy, introducing competition in healthcare is not doomed to failure – evidence suggests that the expansion of internal markets and competition in some public hospitals after 2006 improved management quality and reduced heart attack mortality rates.[16]
However, there was little patience or political will to rework market-based policies to emulate the limited successes under New Labour. Instead, the coalition government resorted to damage limitation before the 2015 elections and made a sharp policy U-turn. By 2014, the Five Year Forward View switched the focus to mergers between providers, creating integrated care services (ICS) to facilitate collaboration rather than competition. CCGs have since been consolidated into regional Sustainability and Transformation Plans, whilst local healthcare providers are mandated to work together with councils.[17]Overall, these reforms, alongside harsh NHS wage restraint, accelerated annual productivity growth to 1.5% from 2010-18.[18] However, actual health outcomes worsened: life expectancy and cancer survival rates worsened and remained below OECD averages, whilst patient satisfaction in the health system dropped by 19%.[19]
Past policy instability also leaves a legacy of uncertainty and distrust between local providers and NHS England, which may continue to discourage cooperation or capital investment to expand ICS. This is partly because local authorities were blocked from implementing integration through mergers by competition regulators. Furthermore, promises of central government funding to compensate more productive hospitals for acquiring their low-performance counterparts never materialised.[20]
The Politics of the NHS Perma-Crisis
The effectiveness of reform is also limited by governments who systematically avoid uncomfortable questions of how to sustainably fund healthcare. The logic of ‘cost disease’ suggests that healthcare spending as a percentage of GDP is bound to rise over time since health workers’ wages need to increase at the same rate as more productive, capital-intensive industries to attract enough workers.[21] Furthermore, the UK’s ageing population is likely to exacerbate pressures on health spending. The proportion of the elderly who have 4+ chronic conditions is projected to rise by 130% by 2035,[22] which requires longer treatment plans and greater coordination across organisations. The increasingly restrictive direction of immigration policy suggests there will be no influx of younger, healthier workers to offset this trend.
Despite this, politicians have failed to level with the public that tax increases or spending cuts to other public services are necessary to secure the future of the NHS. The government’s current high budget deficit and its need to recover credibility with bond investors (after the Truss debacle) limits its ability to continue borrowing to fund the NHS, which necessitates eventual tax increases or other spending cuts. The 2022 Health and Social Care Levy appeared to be an acknowledgement of this reality, but it was scrapped within a year after failing to pacify backbench free-marketeers opposed to any rise in the tax burden, and concerns about its regressive effects.[23] Similarly, Keir Starmer has repeatedly avoided questions of how to fund NHS reforms or whether spending would even rise.[24]
The combination of immediate political costs of taxation with uncertain, long-term and poorly measured benefits of reforms creates incentives for the government to revert to symbolic policymaking and crisis management. Winter bailouts have been required in every non-pandemic year since 2017, the latest of which provides £300m in extra funding for the NHS to compensate for strike action. Yet to fund this, £500m has been reallocated away from the NHS technology and capital budget.[25]
As worn-down equipment and hospital buildings are increasingly not replaced, NHS capacity to meet medium-term demand will continue to suffer, especially because the UK already has relatively low spending on capital (below the OECD average since 2009).[26] This also worsens risks to patient safety associated with the potential failure of outdated infrastructure – there is already over £3.5bn worth of equipment deemed ‘high risk.’[27] Short-term firefighting with no future vision amounts to nothing more than creating a crisis-in-waiting for the next government.
It is concerning that the NHS may now be responding to the government’s political calculus by prioritising policies which have easily quantifiable costs to secure funding. Its long-term workforce plan specifically outlined the size of the rise in training numbers but sidesteps issues that are harder to cost, such as retaining existing staff or reforming the pay system to reduce vacancy rates.[28]This results in half-hearted reforms which are insufficient to address the full scale of the issue.
The Future of Reform?
The public health crisis caused by austerity, as well as the structural factors creating strain on health services, provide ample justification for future governments to commit credibly to a long-term plan for rising health expenditure. Whilst spending alone is far from a panacea, it could go a significant way towards addressing the maintenance backlog and alleviating the workforce retention crisis (through higher wages). This could be funded by a rise in capital gains tax, which may generate less political vitriol than the attempted rise in National Insurance in 2022 since it is a progressive tax targeting fewer taxpayers at the top of the income distribution.[29]
To break the cycle of crisis response, governments must look beyond the next election and begin to shift NHS resources from emergency hospital treatments towards prevention and community care, which only make up 8% of total spending.[30]This could pre-emptively reduce costly initial entries into acute care, hold off a further rise in waiting lists, thereby ease NHS spending pressures. Incentives to expand primary care could be enhanced if integrated care systems received additional funding in proportion to the improvements made to public health in terms of hospital admissions. Stronger support for innovations could further limit the rising demand for acute care. For example, the NHS app could develop AI-assisted personal health advice to enable individuals to make healthier lifestyle choices.[31]
Public health bodies also need reorganisation to strengthen the focus on preventive care. In 2021, Public Health England was replaced by a UK Health Security Agency and Office for Health Improvement, which sits within the Department of Health and Social Care. As a result, they are directly accountable to ministers for implementing health policy but are excluded from its formation by political agendas and corporate interests.[32] For example, public health voices in government were sidelined by food industry lobbyists and internal party critics of nanny statism, causing a pushback in the national obesity reduction plan to October 2025.[33]Creating an independent role for these agencies would increase their ability to coordinate a public health agenda across government departments and meaningfully influence policy in areas including obesity, tobacco, and alcohol addictions.
The effectiveness of ICS hinges on improving coordination between elements of the health system as individuals move between primary and acute care. Sharing patient data across organisations can help to reduce delay and friction between stages of treatment since care providers can make quicker decisions based on previously collated information about patients’ individual needs. However, previous attempts to achieve this have been ineffective, due to unclear data privacy standards and a lack of consultation or buy-in by staff.[34]The Humber and North Yorkshire HCP successfully mitigated these issues by developing a common set of health records in partnership with local communities and care providers, whilst retraining staff with less digital expertise.[35]This collaborative approach could be replicated nationally if the government issued a consistent set of technology and privacy standards. Also, NHS patient data which currently uses 5 different systems could be consolidated into one set of records, to further reduce costs and delays due to unnecessary duplication of information.[36]
Crucially, unlike the 2010s, governments must resist the draw of short-termism. Instead of expecting immediate results defined narrowly in terms of productivity, reforms should be viewed as a long-term project which works gradually to create a sustainable and coordinated health system.
References
[1] Hoddinott, S. (2023). The NHS crisis: Does the Sunak government have a plan? Institute for Government.https://www.instituteforgovernment.org.uk/sites/default/files/2023-01/NHS-crisis-does-government-have-a-plan.pdf
[2] Dayan, M., & Palmer, B. (2022, November 16). Chart of the week: What has happened to NHS staff pay since 2010? The Nuffield Trust.https://www.nuffieldtrust.org.uk/resource/chart-of-the-week-what-has-happened-to-nhs-staff-pay-since-2010
[3] NHS workforce. (2023, June 12). The King’s Fund. https://www.kingsfund.org.uk/projects/nhs-in-a-nutshell/nhs-workforce
[4] Crawford, R., Stoye, G., & Zaranko, B. (2024, January 16). What impact did cuts to social care spending have on hospitals? Institute for Fiscal Studies. https://ifs.org.uk/articles/what-impact-did-cuts-social-care-spending-have-hospitalss://doi.org/10.1016/s0140-6736(21)00232-4
[5] Anderson, M., et al. (n.d.). LSE–Lancet Commission on the future of the NHS: re-laying the foundations for an equitable and efficient health and care service after COVID-19. The Lancet, 397(10288), 1915–1978.
[6] Crawford et. al (2024)
[7] Triggle, B. N. (2022, November 24). Patients dying as ambulances face crippling delays in England. BBC News.https://www.bbc.co.uk/news/health-63743383
[8] Cummins I. (2018). The Impact of Austerity on Mental Health Service Provision: A UK Perspective. International journal of environmental research and public health, 15(6), 1145. https://doi.org/10.3390/ijerph15061145
[9] Blears, B. (2017, October 25). Austerity has created a mental health crisis. HuffPost UK. https://www.huffingtonpost.co.uk/bryan-blears/mental-health-crisis-austerity_b_12599912.html
[10] Parliament UK. (2017). House of Lords - The Long-term Sustainability of the NHS and Adult Social Care - Select Committee on the Long-term Sustainability of the NHS. https://publications.parliament.uk/pa/ld201617/ldselect/ldnhssus/151/15109.htm
[11] Coyle, D., Dreesbeimdiek, K., & Manley, A. (2021). PRODUCTIVITY IN UK HEALTHCARE DURING AND AFTER THE COVID-19 PANDEMIC. National Institute Economic Review, 258(1), 90–116. https://doi.org/10.1017/nie.2021.25
[12] Ibid.
[13] Blair to “hold nerve” over NHS. (2006, April 18). BBC News. http://news.bbc.co.uk/1/hi/health/4917370.stm
[14] Lewis, J. (2020). Government and NHS reform since the 1980s: the role of the market vis à vis the state, and of political ideas about the ‘direction of travel’, Social Policy Working Paper 05-20, London: LSE Department of Social Policy
[15] Lopez Bernal, J.A., Lu, C.Y., Gasparrini, A., Cummins, S., Wharham, J.F. and Soumerai, S.B. (2017). Association between the 2012 Health and Social Care Act and specialist visits and hospitalisations in England: A controlled interrupted time series analysis. PLOS Medicine, 14(11), p.e1002427. https://doi.org/10.1371/journal.pmed.1002427.
[16] Evidence Scan: Competition in Healthcare (2011). The Health Foundation. https://www.health.org.uk/sites/default/files/CompetitionInHealthcare.pdf
[17] Lewis, J. (2020), 18.
[18] Rocks, S. & Rachet-Jacquet, L. (2021) How has the productivity of UK health care changed between 1997 and 2019? The Health Foundation
[19] Papanicolas, I., Mossialos, E., Gundersen, A., Woskie, L., & Jha, A. K. (2019). Performance of UK National Health Service compared with other high income countries: observational study. BMJ (Clinical research ed.), 367, l6326. https://doi.org/10.1136/bmj.l6326
[20] Justin, A. A., Millar, R., Rafferty, A. M., & Mannion, R. (2022). Collaboration over competition? regulatory reform and inter-organisational relations in the NHS amidst the COVID-19 pandemic: A qualitative study. BMC Health Services Research, 22, 1-15. doi:https://doi.org/10.1186/s12913-022-08059-2
[21] Heilbrun, J. (2011). "Chapter 10: Baumol’s Cost Disease". A Handbook of Cultural Economics, Second Edition. Cheltenham, UK: Edward Elgar Publishing
[22] McKee, M., Dunnell, K., Anderson, M., Brayne, C., Charlesworth, A., Johnston-Webber, C., Knapp, M., McGuire, A., Newton, J.N., Taylor, D. and Watt, R.G. (2021). The changing health needs of the UK population. The Lancet, [online] 397(10288), pp.1979–1991.
[23] Wilkinson E. (2022) Health and social care levy: Scrapping raises questions over NHS finances BMJ; 378 :o2321 doi:10.1136/bmj.o2321
[24] Cameron-Chileshe, J. and Neville, S. (2023). Keir Starmer sidesteps questions on how Labour would fund NHS reform. Financial Times [online]
[25] Hoddinott, S. (2023). Forcing the NHS to reallocate capital spending is a false economy. [online] Institute for Government.https://www.instituteforgovernment.org.uk/comment/nhs-capital-spending-false-economy
[26] Ibid.
[27] Neville, S. (2023). NHS capital investment cuts leave England’s hospitals crumbling. Financial Times. [online] https://www.ft.com/content/eff98439-44ba-43a3-b9af-3ce796002c24.
[28] Dayan, M. (2023). NHS trust: why Whitehall’s increasingly divided view on health and care matters. Nuffield Trust.https://www.nuffieldtrust.org.uk/news-item/nhs-trust-why-whitehall-s-increasingly-divided-view-on-health-and-care-matters.
[29] Miller, H. (2020). Don’t waste a good crisis: reform taxes to make tax rises less painful. Institute for Fiscal Studies.https://ifs.org.uk/articles/dont-waste-good-crisis-reform-taxes-make-tax-rises-less-painful
[30] The Economist. (2023). How to fix the NHS. The Economist.
[31] Ibid.
[32] Hunter, D.J., Littlejohns, P. and Weale, A. (2022). Reforming the public health system in England. The Lancet Public Health, [online] 7(9), pp.797–800. https://doi.org/10.1016/S2468-2667(22)00199-2.
[33] Hutton, W. (2023). Britain has an obesity crisis. We won’t solve it until we start listening to ‘nanny.’ The Guardian.https://www.theguardian.com/commentisfree/2023/apr/23/britain-has-obesity-crisis-we-wont-solve-it-until-start-listening-to-nanny
[34] Mistry, P., Maguire, D., Chikwira, L. and Lindsay, T. (2022a). Interoperability is more than technology. 26-27. The King’s Fund.https://www.kingsfund.org.uk/publications/digital-interoperability-technology.
[35] Ibid.
[36] Ibid.