NHS Funding Bill (2019-20)

The NHS Funding Bill 2019-20 was introduced to the House of Commons and given its formal First Reading on Wednesday 15 January 2020. MPs will debate the Bill at Second Reading on Monday 27 January 2020.

Following the Conservative Party manifesto commitment that “within the first three months of our new term, we will enshrine in law our fully funded, long-term NHS plan”, the Queen’s Speech of 19 December 2019 announced that:

For the first time, the National Health Service’s multi-year funding settlement, agreed earlier this year, will be enshrined in law.

Under the NHS Funding Bill 2019-20, the Government commits to increase investment in the NHS in the years to 2024. The Government states that this will result in a £33.9 billion increase in cash terms by 2023/24, with total NHS England spending rising to £148.5 billion in 2024 (this represents a £20.5 billion increase in real terms). The Bill includes a “double lock” commitment that places a legal duty on both the Secretary of State for Health and Social Care and the Treasury to uphold the minimum level of cash NHS revenue funding as outlined in the table below. How the additional funding will be spent is a matter for NHS England, and has been set out in the NHS Long Term Plan (UK Government, ‘NHS Funding Bill Enters Parliament’). The NHS funding settlement was originally announced by Theresa May in June 2018 (UK Government, PM Speech on the NHS, 18 June 2018) and aimed to provide the NHS with financial certainty to plan for the next decade. The funding settlement only applies to the NHS England revenue budget, and does not cover other areas of the Department of Health and Social Care’s spending such as capital investment, education and training, regulation, the local authority public health grant, and social care.

Further information on the provisions of the NHS Funding Bill can be found in its Explanatory Notes (Bill 6-EN), which have been prepared by the Department of Health and Social Care. In particular, these note that the first of the Bill’s two clauses would commit the Government to the following minimum level of cash funding for NHS England in each financial year up to 2023/24:

Figure 1:

Source: NHS Funding Bill 2019-20

Subsection (2) of clause 1 confers a duty on the Secretary of State for Health and Social Care to ensure this funding is only used as revenue resource, rather than as capital resource.

It is unusual for a Government to seek to put a spending commitment into legislation in the way that this Bill would. This is because the Government already has control over its own spending. The Bill would place a duty on the Secretary of State for Health and Social Care to request specific levels of funding, and a duty on the Treasury to provide them with that funding; however, it would not give either of them powers that they did not already have.

The Explanatory Notes confirm that the funding commitment outlined in the Bill have already been agreed by the Treasury and will not require any additional public expenditure. However, the Explanatory Notes state that the Bill will have financial implications, in that it will put the Secretary of State and the Treasury under a legal duty to allot a certain amount of money to NHS England in line with the table above (see figure 1).

The Bill applies to the NHS in England. Responsibility for health services is devolved to the Scottish, Welsh and Northern Irish Governments (although changes to departmental spending can affect the overall budgets of devolved governments through the Barnett formula).

NHS Long Term Plan

This additional funding seeks to help NHS England achieve the objectives of the NHS Long Term Plan, which was published in January 2019. The Plan set out how the NHS will develop over the next 10 years, including moves to more integrated care, a greater focus on prevention, and changes to ensure financial sustainability. The Plan also set out how the budget settlement for NHS England is to be spent over the next five years and includes commitments to:

• increase investment in primary medical and community health services as a share of the total national NHS revenue spend across the five years from 2019/20 to 2023/24 (p.14)
• target a higher share of funding towards geographies with high health inequalities (p.40)
• ensure that funding for children and young people’s mental health services will grow faster than both overall NHS funding and total mental health spending (p. 50)
• continue to balance the NHS’ books nationally and reducing year-on-year the number of trusts and CCGs individually in deficit, so that all NHS organisations are in balance by 2023/24 (p. 101); and
• all efficiency gains being retained by the NHS and revisited in more and better care (p.103)

The Long Term Plan noted that when agreeing the NHS’ funding settlement the government committed to ensure that adult social care funding is such that it does not impose any additional pressure on the NHS. This, the Plan states, “is the basis on which the demand, activity and funding in this Long Term Plan has been assessed.” (p.31)

Trends in NHS funding

The House of Commons Library Briefing Paper NHS Funding and Expenditure (2019), provides further information on expenditure on the NHS since its foundation in 1948, comparisons in health spending across the UK, and real terms changes in UK health expenditure.

In 2018/19, NHS England had a budget of £115 billion, which is planned to rise to £149 billion, in cash terms, in 2023/24. This was reported as a 3.4% rise in real terms from 2019/20 to 2023/24 but as it is now estimated that inflation will be higher over the next few years, the actual real terms increase may be around 3.3% per year (see Health Foundation, Health and social care funding, 23 November 2019).

When announcing the publication of the NHS Long Term Plan in January 2019, the Secretary of State for Health and Social Care, Matt Hancock, outlined how the NHS budget will increase by 2023/24. This is set out in figure 2 below:

Figure 2 [click for larger]:

Sources:

Secretary of State for Health Statement on the NHS Long Term Plan (January 2019); HMT:GDP Deflators December 2019

Figure 3 shows the annual percentage changes in real terms to central government expenditure on health in England over the past 60 years. Since 1958/59 there has been an average annual expenditure increase of 3.9%:

Figure 3 [click for larger]:

Source: House of Commons Library Briefing Paper NHS Funding and Expenditure (2019)

Separate from the settlement for NHS England’s revenue budget, in August 2019 the Government announced additional capital funding to proceed with existing hospital upgrades and infrastructure projects (UK Government, Announces Extra £1.8 billion for NHS frontline services). In September 2019 the Spending Review announced £2.8 billion for additional hospital infrastructure (UK Government, New Hospital Building Programme Announced). The Government has named 6 hospitals to be developed from 2020 to 2025 and 21 Trusts that will receive funding to develop plans for 2025-2030 (Department for Health and Social Care, Health Infrastructure Plan (October 2019), pp. 21-22).

The September 2019 Spending Review also confirmed there would be increases to budgets for the local authority public health grant, and the education and training of the NHS workforce, although some details have yet to be confirmed (the Spending Round included a 3.4% real terms increase in the Health Education England (HEE) budget, while the government has committed to a real terms increase to the public health grant in 2020/21, expected to be around 1%).

Analysis on NHS spending increases

When Theresa May made the original announcement on NHS spending in June 2018, the additional funding was broadly welcomed by the main health think tanks, who stated that the NHS funding deal would ease current pressures. However, the King’s Fund, the Nuffield Trust and the Health Foundation agreed that to restore performance against key waiting times standards, and transform services to deliver better care, annual increases of at least 4% a year were required rather than the average of 3.4% announced by the Government (see: Health Foundation, ‘Response’, 16 June 2018; Nuffield Trust, ‘Funding Settlement: Press Release’, 17 June 2018; King’s Fund, ‘Response’, 17 June 2018). Full Fact provided a summary of the main points: Who's Paying £20 billion for the NHS? (see also the Institute for Fiscal Studies, ‘Securing the Future’, May 2018’).

The National Audit Office commented on the funding settlement for the NHS in January 2019, stating that:

There is a risk that the NHS will be unable to use the extra funding optimally because of staff shortages. Difficulties in recruiting NHS staff presents a real risk that some of the extra £20.5 billion funding will either not be used optimally (more expensive agency staff will need to be used to deliver additional services) or will go unspent as even if commissioners have the resources to commission additional activity, health care providers may not have the staff to deliver it

From what we have seen so far, the NHS long-term plan sets out a prudent approach to achieving the priorities and tests set by the government, but a number of risks remain (p.9).

The Labour Opposition has called for the Government to bring forward a plan and additional funding “to end the crisis in social care and provide for at least a 4 per cent per year real terms increase in health spending” (see House of Commons Hansard, Opposition amendment to the Queen's Speech debate on health and social care, 16 January 2020).

The Nuffield Trust has also raised concerns about describing funding increases in cash terms within the NHS Funding Bill, noting that if inflation rises the new pledge could mean the NHS gets less than the £20.5 billion real terms increase pledged in 2018 (Nuffield Trust briefing for the Queen’s Speech debate on health and social care, 16 January 2019).

The Local Government Association (LGA) in its briefing on the bill argued that “increased funding for the NHS will only be maximised if there is an equivalent scale of investment in social care, public health and prevention services“, and called for social care and public health funding to be placed on the same long-term footing. To match the growth in overall NHS funding, the LGA called for the public health grant to be increased to at least £3.9 billion by 2024/25 (LGA Briefing on the NHS Funding Bill, 27 January 2020).