Closing the health and social care funding gap in Wales – can we stop worrying now?

The announcement by the UK Government that spending on the NHS will increase by an average of 3.4% in real terms a year from 2019-20 to 2023-24, and the associated allocation to Wales of £1.2 billion in real terms (£1.37 bn cash) over the period, has been welcomed as providing the basis for the long-term planning which so many in the NHS have been seeking. But it is not a bonanza and should not be seen as ending the discussion about resourcing health and social care or wider wellbeing in Wales.  

 

The Wales share of the funding in cash terms is:

 

2019-20 £m	2020-21 £m	2021-22 £m	2022-23 £m	2023-24 £m
370	550	800	1,060	1,370

 

The uplift for Wales includes the 5% needs element in new Fiscal Framework for Wales, estimated to be adding over £250 million (cash) cumulatively over the five years, to what would have been allocated under the old version of the Barnett Formula.    

 

We have to wait for the Chancellor’s Autumn Budget to learn how the increase is to be paid for, including exactly how “taxpayers will have to contribute a bit more”. Given other spending pressures, offsetting cuts in other areas of UK spending may not be an option. Questions remain over whether there will be a matching 5-year NHS England capital plan; funding for public health; and the UK Government’s intentions for funding social care, including its response to the idea of a ‘Social Care Premium’ for England (see below on proposals for Wales).  

 

But this not just about funding. UK ministers are seeking improvements in productivity and performance alongside, to be set out in 10-year plan by NHS England in the autumn.      

 

Clearly the announced additional funding for the Welsh Budget will be good news. How the funding is allocated will be for decision in Wales, but relevant points include:

 

• The Health Foundation’s 2016 assessment of future funding needs for health and social care in Wales to 2030-2031 implies that, assuming an annual 1% improvement in efficiency (£70 million a year), day-to-day spending on the NHS would need to increase by 2.9% a year in real terms – just over £200 million a year at current prices – to meet cost and demand pressures. The outcome of negotiations about the NHS pay deal in Wales could add to that, at least in respect of 2018-19 and 2019-20 where the assessment assumed the continuation of the public sector pay cap.

 

• The core resource budget for NHS Wales has been moving towards alignment with this requirement, having increased by 2.3% on average in real terms between 2015-16 and 2017-18 with a bigger budgeted increase for 2018-19.

 

• In this context, the commitment to a 3.4% annual increase for the next 5 years would represent welcome clarity but not a fundamental step-change. The settlement will help with cost and demand pressures but commentators warn that on its own is not enough to address the scale of challenge which services face. Patients are unlikely to see dramatic early change.

 

• And although the settlement should avoid the need to cut spending on other services to fund the NHS, Wales will continue to face some difficult choices about spending.

 

• The Health Foundation has identified the importance of social care to delivering an effective NHS. It projected a requirement for net spending on adult social care in Wales to increase by 4.1% a year in real terms, roughly equivalent to £65 million a year on average. The Welsh Government has protected social service spending during austerity but, depending on the Chancellor’s autumn Budget, it may have to decide whether to allocate all the additional money to the NHS or use some of it for social care or other services. Housing, education, leisure and community services all have an impact on wellbeing.  

 

On the other hand, austerity has left a challenging funding legacy:

 

• Spending per head on health (real terms) in Wales has converged towards that for England, especially through the period of austerity (down from 6 % higher in 2009-10 to 3% higher in 2016-17, using adjusted PESA/CRA figures). The Welsh Government quotes spend per head on health and social care as being 8% higher in Wales than England. Studies have suggested that relative health needs per person in Wales remain significantly higher.   

 

• Public spending on health across the UK increased at around 4% a year in real terms on average from the 1950s to 2015-16. As an indicator of the impact of austerity, spending on the Welsh NHS would have been around £2 billion higher in 2016-17 than it was had such a growth rate been maintained from 2010-11 onwards.

 

The new settlement will not enable that lost ground to be recovered but action in Wales to add value to the UK funding will be vital.

 

• Improving productivity and efficiency will be an essential part of the mix. Wales has just produced its long-term vision for a fundamental shift in the delivery of health and social care services with a much greater emphasis on primary and community care, integration and prevention, backed by a £100 million transformation fund and integrated care fund. The Welsh Government’s commitment to producing ‘a sustainable funding model for health and social care that will stand the test of time’ should be helped by the announcement but is still essential. To make a real difference through improved efficiency and productivity, Wales has to outperform historic productivity improvement rates.

 

• Wales could use its evolving tax powers to increase its Budget and Professor Holtham’s innovative proposals for using them as a means of paying for social care in Wales show the real possibilities. In looking at health and social care as a whole, it is important to remember that the scope of the tax powers, which on current plans will cover around 30% of day-to-day government spending, and size of the tax base, mean that Welsh taxation can only be part of a solution.

 

The challenges of meeting a much higher relative health need per person than in England and serving an older and faster-ageing population mean that difficult choices will continue to be necessary and the pace of service change rapid.  The settlement should be seen as helping create a stable platform, not a reason to take the foot off the accelerator.

 

We will be publishing a more detailed paper on the health and social care funding gap in Wales later this summer.                  

 

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