Content originally from The Kings Fund
In this blog, we recap the key health and care spending announcements from the spring Budget 2024 – the last budget before the next general election.
Key announcements
- £3.4 billion long-term capital investment over three years (from 2025/26) to upgrade medical equipment such as MRI scanners, roll out electronic patient record systems, and reduce the time NHS staff spend on administration
- £2.45 billion of additional resource (day-to-day) funding for 2024/25 for the NHS.
Further announcements and ambitions, including more specific areas funded by the long-term capital investment above:
- £35 million over three years (2024/25–2026/27) to improve maternity safety through specialist training, more midwives and engagement with mothers
- £45 million of additional funding for medical research charities in the life sciences sector
- Duties introduced for vaping products and increases to tobacco duty from October 2026. Duty on alcohol is frozen until February 2025
- Tighter controls on how much the NHS spends on temporary (agency) staff, including the ending of ‘off-framework’ agency staffing from July 2024
- NHS England, integrated care boards and trusts will start reporting against new productivity measures from the second half of 2024/25.
Let’s set the scene. The NHS has risen to the top of public polls of the most important issues facing Britain today. The Prime Minister has said he will not be able to cut NHS waiting lists, which was one of his five key priorities. Industrial action by NHS staff, once unheard of, is now endemic. Eight local authorities have issued formal notices of their severe financial distress. Public satisfaction with health and care services is at record lows.
Enter the spring Budget 2024. Fiscal statements are always important technical and legislative events. But they are also a statement of intent from governments, especially in the run up to a general election. So what was announced and what does it mean for health and care services and the people who rely on them?
Health spending
There were two significant spending announcements in the spring Budget 2024.
Day-to-day (resource) spending
The first was for the here and now: a £2.45 billion boost to planned day-to-day (resource) NHS spending in 2024/25 on things such as staff salaries, medicines, and other items a health service uses during the year.
The Budget documents say this extra £2.45 billion day-to-day funding will support the NHS to ‘continue to improve performance and reduce waiting times’. This is a tall order. The £2.45 billion will give the NHS greater certainty and make it easier to cover the costs of staff pay increases in 2023/24. But the funding on the table is unlikely to be enough to support the capacity increases the NHS needs to cope with rising demand and the costs of industrial action over the coming year. At that stage, the NHS would be doing very well in 2024/25 to maintain current waiting time performance (which, remember, is at historic lows).
This funding boost means that NHS England’s day-to-day spending will barely continue to rise in real terms (ie, accounting for inflation) between 2023/24 and 2024/25. Overall spending for the wider Department of Health and Social Care (DHSC) budget (ie, both day-to-day and capital investment) is also expected to rise in real terms over this period.
But day-to-day spending by the DHSC (which includes, but is wider than, NHS England day-to-day spending) appears to fall in real terms in 2024/25. This may be avoided by using some of the funding HM Treasury is holding in reserve for 2024/25 (and which for the moment is not allocated to any specific government department). This reserve funding could be used to boost the DHSC’s day-to-day budget once the impact of new pay deals and industrial action becomes clearer – but that is not a promise that has been publicly made yet, so it is not a promise the DHSC could take to the bank.
Capital spending
Nearly a year ago, the Chancellor announced what he called ‘the most ambitious public sector productivity review ever undertaken by a government’. One of the early results of that review was the second significant spending announcement from the Budget: £3.4 billion of capital investment to reform how the NHS works.
This funding aims to double the planned investment in NHS technology and digital transformation. It includes changes that patients and the public will notice – such as greater use of the NHS App to access services and manage our health conditions. It also includes changes that affect NHS staff more directly, such as upgraded MRI scanners, paperless patient records, artificial intelligence to help automate clinical coding and the writing of discharge letters, and digital passports that record staff members’ education and training so they don’t have to laboriously fill in forms or repeat training when they move around the NHS.
The £3.4 billion will be spread over three years, starting from 2025/26 – so don’t expect to turn up to hospital and be greeted by a robot right away. And to the perennial question of ‘is the money really new?’, the answer is ‘mostly’. A large share of this £3.4 billion will come from more capital spending than the government originally planned for future years, and some will come from reallocating funding from other government departments (perhaps including other areas of the health budget, because we don’t know what the baseline of planned capital spending for health and care in 2025/26 would have been before this announcement).
By modernising antiquated NHS IT systems, the government hopes it can deliver £35 billion of cumulative productivity savings from 2025/26 to 2029/30. Under these plans, average annual productivity growth in the NHS would reach 1.9% from 2025/26 to 2029/30 (reaching 2% in the final two years) – described as ‘a substantial increase on historical NHS productivity growth’.
Investing more in NHS digital technology is a good thing. The government has also put in place plans for long-term capital investment to support the long-term workforce plan it published last year. The Chancellor is correct when he says ‘the way to improve public services is not always more money or more people – we also need to run them more efficiently’. But will these NHS productivity ambitions be realised by 2029/30? I’m not so sure.
Previous experience suggests there will be some lags between when greater investment in technology is made and when this investment produces results. For example, the NHS will need to wait for some existing IT contracts to expire and staff will need the time and headspace to be trained on new patient record systems and AI-supported imaging technology. All of this will take time and money. After a comprehensive review, the National Audit Office said in 2020 that ‘the previous attempt at digital transformation in health was expensive and largely unsuccessful, but we are not convinced that all the lessons are being applied now’. The government must hope that lessons have been learnt since.
The NHS Long Term Workforce Plan explicitly says that improving NHS productivity depends on ‘a significant increase in funding for technology and innovation’, which the government has now promised. But the plan also says it depends on better infrastructure and changes to how staff are trained and retained. The missing pieces of the puzzle then are big ones, including where the capital funding will come from to improve increasingly worn-out NHS buildings and equipment.
The story of technology funding in the NHS over the past ten years has had two recurring features: repeated promises that the NHS will go paperless (when the Chancellor Jeremy Hunt was Health and Social Care Secretary he challenged the NHS to go paperless by 2018); and repeated raids on technology budgets to prop-up day-to-day spending. By prioritising investments in technology, the government has backed a good horse – it now needs to stay the course.
Other spending announcements
Sometimes, no news is bad news.
That is surely the case for many other areas of health and care spending that were not touched on in any detail by the spring Budget. Councils with responsibility for adult and children’s social care will receive the £500 million extra grant funding in 2024/25 that was announced in late January 2024. Far less than the £7 billion annual increase Jeremy Hunt said the adult social care system needed when he was chair of the Health and Social Care Select Committee in 2020. The heat and noise from adult social care services will only increase between now and the election as more people struggle to access the care they need, and providers try to remain solvent.
Although the Chancellor continued the freeze on alcohol duty, he did show a welcome willingness to use his fiscal powers to improve the health of the nation. Alongside the government’s existing plans to create the first smokefree generation through restricting the sale of tobacco products, the Chancellor also introduced a new duty on vaping products and increased tobacco duty from October 2026. The hope is that these measures will help discourage non-smokers from vaping, while helping vapes play a role in supporting smokers to give up cigarettes.
Another key part of reducing tobacco use are smoking cessation services supported through the public health grant. Before the Budget, the government did announce a small real terms increase to the public health grant in 2024/25 compared with 2023/24, including time-limited funding to help people quit smoking. But stop-smoking services have been hit particularly hard by cuts to public health spending since 2015/16, and spending will still remain far lower per person compared to the past.
Finally, the Chancellor stuck to his plan from autumn 2022 that will see day-to-day spending for government as a whole increasing by 1% a year on average in real terms over the next parliament. Because of inflation and population growth, the Office for Budget Responsibility (OBR) estimates that departmental spending per person in real terms will not grow over the next five years. Why is this significant? Well, as the OBR notes, if the government is to meet its existing commitments on health, defence, schools, childcare and overseas aid spending (see below) then real cuts must happen in all other departmental budgets from 2025/26, including those that contribute to the wider determinants of the nation’s health.
https://flo.uri.sh/visualisation/16990110/embed?auto=1
So what does it all mean?
Some business gurus advise ‘decade thinking’ – where we ‘plan in decades, think in years, work in months, and live in days’. Well, with local NHS organisations still waiting for the annual NHS planning guidance with about a fortnight to go until the next financial year, planning in months might feel like an improvement.
And taking a longer look at the plan for a decade, ten years ago, the NHS was starting a substantial productivity drive after the great financial crisis. Now we have another drive, as health and care services try to do ‘more with less’ on a substantial scale. Ten years ago, life expectancy in the UK was 78.7 years for males and 82.6 for females. Because of stalling life expectancy growth, we are now back to the same levels.
Health and care services have obviously developed in some ways over the past ten years. There are new services and treatments available, such as home testing for the early signs of bowel cancer. And there are new ways of delivering services, such as same day emergency care to reduce avoidable hospital admissions. The capital investment announced today will see yet more services and treatments develop in the future. But services are under pressure now. Some NHS staff may be renewing their real passports to get jobs overseas well before new NHS digital passports arrive.
Overall, it can sometimes feel like the past ten years have been a lost decade for health and care services. If that was the plan, it was a poor one.
SWF Health & Social Care Group 