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Editorial Monday 21 March 2016: NHS funding, Schrödinger's cash and refuting the gravity of Laws

Not only has Mark Britnell written a book, so too has the former Liberal Democrat MP for Yeovil David Laws.

Mr Laws' book asserts that NHS England's Sun King Simon Stevens originally asked for £15-16 billion in additional cash for the NHS in 2014, and was told to try asking for a more realistic, smaller sum. Half, in short.

How plausible is this?

Mr Laws' timing is curious. During the 2010-15 Coalition, Lib Dems were most certainly not above leaking policy disagreements to national media. Had this seemed a major issue for the Lib Dems at the time, we would have heard about it then.

In 2014, Norman Lamb was heath minister. Norman later made his own interventions on health spending during the general election campaign and after. Had this funding dispute been known among Lib Dem MPs, Norman would likely at least have alluded to it.

He didn't.

So we might reasonably question the motivation of a revelation which seems timed principally to sell a book.

The NHS cash call hidden in plain View
Could Simon Stevens have made a case for more than £8 billion cash?

Erm, yes. Obvs.

Not only would that be a perfectly plausible thing for a politically shrewd person to do, he did it.

And thanks to my hacking superpowers, I can show you the very document.

Let me introduce you to the highly confidential Five-Year Forward View, which states unambiguously, "independent analysts have previously calculated that a combination of growing demand, if met by no further annual efficiencies and flat real terms funding, would produce a mismatch between resources and patient needs of nearly £30 billion a year by 2020/21. So to sustain a comprehensive high-quality NHS, action will be needed on all three fronts – demand, efficiency and funding. Less impact on any one of them will require compensating action on the other two.

"The NHS’ long run performance has been efficiency of 0.8% annually, but nearer to 1.5-2% in recent years. For the NHS to achieve an extra 2% net efficiency/demand saving across its whole funding base each year for the rest of the decade would represent a strong performance - compared with the NHS' own past, compared with the wider UK economy, and with other countries' health systems. We believe it is possible – perhaps rising to as high as 3% by the end of the period - provided we take action on prevention, invest in new care models, sustain social care services, and over time see a bigger share of the efficiency coming from wider system improvements.

"On funding scenarios, flat real terms NHS spending overall
would represent a continuation of current funding protection. Flat real terms NHS spending per person would take account of population growth. Flat NHS spending as a share of GDP would differ from the long term trend in which health spending in industrialised countries tends to rise as a share of national income.

"Depending on the combined efficiency and funding option pursued, the effect is to close the gap by one-third, one-half or all the way. Delivering on the transformational changes set out in this Forward View and the resulting annual efficiencies could - if matched by staged funding increases as the economy allows - close the £30 billion gap by 2020/21. Decisions on these options will be for the next Parliament and government, and will need to be updated and adjusted over the course of the five year period. However nothing in the analysis above suggests that continuing with a comprehensive tax-funded NHS is intrinsically un-doable". (My emphasis)

The one-half in cash scenario is your £15-16 billion.

The one-third in cash scenario was, as Simon has repeatedly made very clear, based on adequate social care funding, capital funding, prevention getting a serious upgrade and a proper transformation fund. These are, as Simon has made quite clear, not in place.

Schrödinger's cash
You'll be familiar with the quantum physics paradox of Schrödinger's Cat. It is simultaneously alive and dead.

In a country with a Government pursuing reductions in current government spending for a decade, this is very much the best way to understand the NHS budget: as Schrödinger's cash.

We must always remember that the NHS has enjoyed relative protection. Local government has lost about 30% of its funding, and more is yet to go.

The recent Public Accounts Committee report 'Sustainability and financial performance of acute hospital trusts' rightly excoriated the sector's plans for the £22 billion in efficiency savings.

It states "the financial health of NHS trusts and NHS foundation trusts has significantly worsened in the last three financial years. Trusts had a net deficit of £843 million in 2014–15, which is a severe decline from trusts’ £91 million deficit in 2013–14, and £592 million surplus in 2012–13. Trusts’ finances look set to deteriorate further—halfway through 2015–16 three quarters of trusts had a deficit, and their total overspend could rise to around £2.5 billion.

"The Department of Health, NHS England and NHS Improvement have not taken action soon enough to keep trusts in financial balance. The target for trusts to make 4% efficiency savings across the board is unrealistic and better data is needed for more informed savings and efficiency targets.

"Failings in the system for paying providers need to be addressed as a matter of urgency, with NHS Improvement and NHS England acknowledging that the current system is not fit-for-purpose as it does not incentivise the right behaviours needed for joined-up healthcare services.

"Spending on agency staff has contributed to trusts’ financial distress, and action to tackle this problem is welcome, albeit late. The NHS will not solve the problem of reliance on agency staff until it solves its wider workforce planning issues.

"We recognise the immense challenge of achieving financial and service sustainability when demand is rising and budgets are tight, and acknowledge the ongoing efforts of NHS England and NHS Improvement to find solutions. But there is much to do to produce the convincing plan necessary for the NHS to get itself back into financial balance".

A laurel and hearty handshake are due for the PAC's 'no shit, Sherlock' candour. (It's also well worth reading an anonymous hospital finance director's evidence to the inquiry, showing the the culture of collusion and cover-up are alive and well.)

There is no serious plan to achieve £22 billion in quality and productivity gains because the £22bn sum is a work of political and economic fiction.

The point is simple: there was never a 'right' amount of money to request. It's intrinsically dynamic.

The '£30 billion by 2020' itself, which has acquired the status of canon law, is simply an educated guess, based on modelling.

Simon Stevens is a clever, capable guy, but he neither has nor seeks tax-raising powers.

It feels more than mildly ridiculous that I have to point this out, but Simon Stevens is neither the Prime Minister nor the Chancellor of the Exchequer.

NHS funding ultimately isn't Simon's choice, as NHS England's unambiguous statement refuting the gravity of Laws makes perfectly clear: "the FYFV clearly and independently said that the NHS would need in the range of £8-21 billion real terms annual growth by 2020, depending on the level of efficiency, capital investment and transformational funding. We stand by that view and were not 'leant on'. David Laws was not part of these discussions, and has no first-hand knowledge of them.

"Simon Stevens has been more publicly outspoken in arguing the NHS's corner than any previously serving NHS chief executive - including publicly in the run-up to the November 2015 spending review - and he will continue to do exactly that.

"If in the years and decades ahead, we want a well-functioning NHS, it's obvious and inescapable that the nation will have to use economic growth to fund healthcare more generously. That's an argument we will forcibly make.

"However, the pace of that funding growth, and how to balance competing demands - including for social care, disability benefits or schools - are inevitably and rightly judgments for elected governments".  

Jeremy Hunt, George Osborne and David Cameron have tried without much success to term this 'The Stevens Plan'.

They have had slightly more traction with repeating that the £8 billion extra cash by 2020 (it's not ten billion, of course; the other £2 billion was last winter's 'Staying Upright Fund') is 'the NHS' own plan for itself'.

When is £8 billion not £8 billion?
Nor is the extra £8 billion actually £8 billion. It has to fund all the current deficits, the 1% NI employers' contribution rise next month and whatever the effects of last week's budget changes on public sector pension contributions are going to be.

The basic points are this: Simon Stevens successfully got a funding increase, and then got it front-loaded.

The Chancellor, for however long he lasts, is basically a middlingly-successful political bullshitter. In 2010, he promised to eliminate the deficit by 2015, and raised taxes (despite Mr Cameron's contrary promise) and cut spending because of course we risked being made the next Greece (apart from our having a sovereign currency, being out of the Euro and being the world's fifth largest economy) by non-existent bond vigilantes.

Once it was clear that wasn't working, and was actually damaging the economy, Mr Osborne basically borrowed shadow chancellors Alastair Darling's and Ed Balls' plans for public spending.

In other words, trying to pick a 'right' amount of NHS funding is a political and health economic parlour game.

On its current trajectory, the NHS will evidently hit funding crunches. It will then be bailed out by the Government, because the British people will not permit the Government to do otherwise.

Once we get beyond the magical thinking, it is clear that the NHS' financial wheels will come off, and the Government will then have to find the money.

Schrödinger's cash will be found.

It's probably time to follow iridescent Kings Fund chief economist Professor John Appleby's suggestion, and stop talking so much about the £8 billion and £22 billion figures. Making notional savings for HM Treasury motivates very few of the clinicians and front-line colleagues whose daily actions spend the NHS's budget.