Anita Charlesworth - overview of the prospects


Health Foundation Chief Economist Anita Charlesworth spoke at CIPFA's Annual Health and Social Care Conference on 21 October. Anita said she was known for delivering bad news in quite an upbeat way, and proceeded to so.

The underlying story is simple enough: we are halfway through fiscal consolidation in which the Government plan is to cut spending by 10% of GDP, comparing 2010 with 2020. She emphasised that the latest phase, as announced in the summer, puts a lot of emphasis on welfare reform, which is by 2020 due to contribute £12bn of the £17bn additional consolidation announced. That may well have knock-on impacts for health and social care.

The Chancellor has said he will look at Annually Managed Expenditure (which covers debt interest and pensions etc) as well as Departmental Expenditure Limits (DEL) this year, but given such factors as the ‘triple lock’ on pensions, that is unlikely to help. He has also said that the Government is looking to protect capital rather more than has recently occurred. 

Health is  some 19% of public spending and a third of DEL, so it’s no surprise that protecting health while reducing DEL by 40%  in a decade leads to exceptional pressures elsewhere. The NHS funding commitment over 2016-21 is to maintain the budget in real terms plus add £8bn over the 2015-16 budget, which was itself £2bn over 2014-15, so explaining why ‘an extra £10bn’ is quoted by the Government.

The demographic pressures on health have been such that underlying trust deficits have grown steadily in recent years. Last year, in order to achieve year-end balance for the Department of Health, the Treasury gave £250m at Christmas and allowed a £600m transfer from Capital. Quarter 1 already shows a £900m deficit this year.  Moreover, front line staff morale is low, and there is an increasing perception that it makes sense to resign, then be paid more via agency arrangements and so be better able also to choose which ward to work on.

That’s the background to the Health Foundation / King’s Fund recommendation that – rather than underfund the NHS, allow it to overspend, then bail it out –  a Transformation Fund should be set up, of £1.5bn rising to £2bn  per year. Historically, she said, most change hasn’t delivered the savings anticipated, because the change isn’t adequately resourced.  That could be done by deflecting capital, by ‘investing in people rather than new buildings’.

Charlesworth cited Rob Whiteman’s view that the NHS set-up assumes that financial failure precedes service failure, whereas local government is set up to ensure that service failure precedes financial failure, and there is evidence that up to 20% of people needing help now ‘don’t get it’. Charlesworth identified the danger to the whole system of reduced provision of social care. Aside from the grant reductions, two factors make that likely:

1. The savings made by reducing real terms pay for care workers have ‘had their day’. Indeed, the ‘Living Wage’ is set to add £2bn to LA-funded social care over the five year period.  

2. Population growth will add £4bn to pressures by 2020/21.

‘I can’t see’, she said ‘the Chancellor finding £6bn by the end of the decade and I can’t see a way through it’. When asked whether changing payment mechanisms away from rewarding activity might improve things, Charlesworth was bluntly pragmatic: payment systems are very weak drivers of change, she said. Most of those making clinical decisions have no idea of how payments are made in the system, so how will changing the system influence them?

Frontline practice was the key, she said. We need to put more effort into the hard work of giving people the skills they need. And separated health and social care workforces make no sense – look at Netherlands for good single system.

Download the presentation here [PDF 469 KB]