Budget reaction: ‘laughably low’ GDP deflator and pay deal implications

A finance paper to NHS England’s October board meeting stated that the NHS could be looking at up to £7bn of increased costs in 2023/24, given higher inflation and making assumptions for pay awards. So, the £3.3bn increase announced on Thursday looks to have delivered about half of what the service might need to stand still.

However, NHS England chief executive Amanda Pritchard (pictured) welcomed the chancellor’s decision to prioritise the NHS, with many other departments facing a significant financial squeeze. She pointed out that the NHS was already one of the most efficient health services in the world and was committed to delivering further efficiencies. ‘While I am under no illusions that NHS staff face very testing times ahead, particularly over winter, this settlement should provide sufficient funding for the NHS to fulfil its key priorities,’ she said.

Nuffield Trust senior policy analyst Sally Gainsbury was less convinced. She took to Twitter to put the £3.3bn increase into context. The NHS budget will increase in cash terms by just 5.1%, she said. The government’s preferred inflation measure for public services is the GDP deflator. But at just 3.2%, she described this as ‘laughably low’ compared with consumer price index forecasts.

‘But even if the NHS truly did experience inflation as low as 3.2% next year, that would leave room in the budget for just 1.8% more activity – barely enough to keep up with demographic growth, let alone tackle huge waiting lists,’ she said.

This has real implications for NHS services, with Ms Gainsbury claiming NHS bodies have already put £1bn of planned developments on hold. It also suggests that the government will be looking to cap pay rises next year at no more than 3.2%, which may be difficult given unions are already planning industrial action over this year’s award.

Public sector union Unison said there was nothing in the autumn statement to change the minds of NHS staff currently voting on strike action. ‘The government acts like there’s no public sector pay or workforce crisis,’ said union general secretary Christina McAnea (pictured). ‘Health worker wages must be boosted now to prevent a damaging dispute this winter. Otherwise, the NHS can’t hang on to experienced staff, halt the damaging exodus of key workers or improve wait times for patients.’

Meanwhile the Royal College of Nursing, whose members have already voted for strike action, has warned the health secretary Steve Barclay that any further meetings must involve ‘formal, detailed negotiations’ and these had to start within five days.

NHS Providers’ interim chief executive, Saffron Cordery, said the £3.3bn in each of the next two years would ‘go some way towards making up the shortfall in NHS budgets caused by inflation and will allow the NHS to deliver on its key priorities’. She also welcomed the commitment to publish an independent assessment of NHS workforce needs next year. But she added that trust leaders were also ‘keenly aware’ of the extremely challenging state of wider public finances. ‘The impact of double-digit inflation and deep budget cuts to other key public services will exacerbate the cost of living crisis and consequently, pile on the pressure on the NHS,’ she said.

And while the additional funding for social care was a good move, delaying the charging reforms put forward by Sir Andrew Dilnot was a backwards step. ‘Trust leaders are seeing daily how years of under-investment in social care has knock on effects for the NHS with thousands of people staying in hospital longer than needed,’ she said. ‘We need radical action – and fast.’

Chris Thomas, head of the Institute for Public Policy Research 's Commission on Health and Prosperity, said the government had diagnosed the right problems in its autumn statement, but prescribed the wrong medicine.

‘While the chancellor acknowledged economic inactivity is a major challenge, nothing he announced will shift the dial on the labour market malaise being driven by the UK population’s health crisis,’ he said. The announcement on health funding would ‘neither avert the historic crisis the NHS faces this winter, nor bring down record waiting lists, nor address the fact that UK outcomes are lagging behind other high-income countries’.

While acknowledging that social care funding would support hospital discharge, Mr Thomas also described delay to more fundamental social care reform as ‘nothing short of a travesty’.