All about the money

Select committee hearings in the Commons can be attritional affairs. MPs grandstand, frequently interrupting witnesses in the manner of the hard-nosed inquisitors of Radio 4’s Today programme. Witnesses, it seems, generally set out to be as helpful and open as possible, but can end up defensive under the onslaught of questions. But some come to the hearing with a message – and so it was when Simon Stevens (pictured) and Jim Mackey appeared before the Health Committee in October.

The chief executives of NHS England and NHS Improvement were clear. The health service was doing as asked – reducing spending, transforming care and largely maintaining quality standards – but it needs more money.

While we’ve heard that refrain before, the timing – with the chancellor preparing his first autumn Budget on 22 November – is interesting. It also means that two of the most senior officials in the health service have publicly asked their political masters to find additional funding – something that is usually confined to the corridors of Whitehall. 

Either the officials are sure of their ground and more money is coming or it’s a last-ditch attempt to get a wave of public opinion demanding funds be forthcoming.

At a hearing on the work of NHS England and NHS Improvement, the MPs kicked off with questions about the Care Quality Commission’s latest annual State of care report, published in October. The report said the quality of health and social care had been maintained over the previous year despite some significant challenges. Most people were receiving good, safe care. However, the changing nature of people’s health and care needs meant that the service was at full stretch.

Mr Stevens paid tribute to NHS staff, but soon moved the discussion to money. The CQC report had made it clear that the integration of care and the Five-year forward view programme were needed to future-proof services, he said, continuing: ‘But that cannot be done without proper funding along the way. That shows up clearly in social care – but not just in social care; that is also a live issue in many parts of the National Health Service.’

Asked about the four key performance standards – A&E, elective, cancer and ambulance waiting times – Mr Stevens said NHS England was committed to their achievement. But this year something had to give. 

‘[Elective waiting times] clearly will slip during the course of this year. Prospects for next year and the year after will be determined by the budget for the NHS in those years,’ he added.

One MP, Ben Bradshaw, said funding increases of 1.8% this year, 0.7% next year and then 0.2% and 0.1% were the lowest rises in NHS history, representing real-terms cuts per head. Because of this, a further deterioration in quality must be expected.

Mr Stevens replied: ‘It is no secret—and I am not saying anything I have not previously said—that the currently pencilled-in funding for the National Health Service for next year and the year after looks extremely challenging and, if not amended, it is going to be very hard for the NHS to do all that is being asked of it over the course of the next year and the year beyond.’ 

The good news is that the government understands this, he added. ‘The prospects for the kinds of measures that you are talking about for next year depend on decisions that are made on 22 November.’

But if health and care get more money, will it be well spent? Social care has, of course, received additional funding this year – an extra £1bn, with a further £1bn spread over the following two years. 

Mr Mackey was asked why the additional funding had yet to make an impact on delayed transfers of care. There were several reasons for this, he said, including the time it takes to create a local market – for home care, for example – or because the money is non-recurrent making it hard for councils to plan ahead. 

‘From our point of view, we argued hard for the extra money and for it to be spent in social care, and we rightly expect to see an impact from that,’ Mr Mackey said. 

Controlling pay rises to an average of 1% a year has been an important element of the health service’s attempts to hold down spending, but health secretary Jeremy Hunt has indicated that next April’s increases will break through that ceiling. This is supported by the Scottish government.

Health service managers, aware of the pay cap’s impact on recruitment and retention, will also be in agreement. The difficulty is, how will this be paid for? A pay rise of more than 1% had to be funded, Mr Mackey told the MPs. 

‘The NHS is generating serious levels of efficiency. It is very hard to imagine how that sort of pay award could be internally financed.’ 

Mr Stevens added: ‘We said from the get-go that over time it will be necessary for NHS staff to get rates of pay that are consistent with that [public sector pay policy] and the rest of the economy. It is not reasonable indefinitely to expect people to take the kind of net pay cuts that they have seen, but that does need to be funded.’ 

Leaving aside the question of more funding, the committee wanted assurances that the NHS was spending the money it does have well. 

Mr Mackey was asked about variations in clinical practice that can lead to additional costs – for example, revisions of hip fractures within 30 days of surgery. 

MP Andrew Selous said in some hospitals no revisions were needed, but in others up to 7% were revised. A tariff for the revision operations was paid ‘no questions asked’, he added. Physiotherapy was known to reduce the incidence of revision but was given only to 50% of patients. 

Mr Mackey said NHS Improvement was working with trusts to improve on this, but analysing the data was a labour-intensive job and the system was under intense pressure – managers and clinicians simply did not have the time to do it. 

The committee asked if, in the spirit of integration, the two organisations should be merged. Mr Stevens said there would be ‘merit in more fusing of our functions and teams’ – as has happened in the South West, where the regional director reports to both national bodies. 

He believes this would happen more and more. ‘We each want to take further significant administrative savings out of the overhead of the NHS, modest as it is by international standards at 2p in the pound relative to 5p or 6p in Germany and France.’

A full merger would require legislation and this was unlikely to happen soon.

Mr Mackey agreed. ‘There is an awful lot more we could do to simplify. We should seriously reduce our overhead and I am instinctively a devolution person. So, I think we should be looking, wherever possible, to push things into the local system – simplify the architecture – but to formally merge requires a change in the law.’

Senior figures often refer to an implicit deal with the Treasury – reform, show continuing efforts to be efficient and get best value for money and it will consider funding increases.

As far as Mr Mackey and Mr Stevens are concerned, the NHS is doing its bit, but to maintain standards and recruit and retain staff the service needs the Treasury to hold up its end of the bargain.