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Editorial Tuesday 5 May 2015: It's raining cash: hallelujah! Why the NHS needs a double-Steve Austin and The Builder’s Message

"And here I sit so patiently,
Waiting to find what price
You have to pay to get out of going
Through all these things twice"
Bob Dylan, 'Stuck Inside Of Mobile With The Memphis Blues Again'

I wasn't into football as a young man: I'm still not now that I'm less young. Still, football culture was a reality of the 1970s and 80s, with hooliganism, tribalism and affordable standing terraces.

Standing terraces gave us one of the great demotic English expressions, derived from standing room being tightly packed with boys and men who'd mainly pre-loaded on beer, and might not fancy missing the match to micturate.

"Don't piss down my back and tell me it's raining" is a woefully under-used expression. It hasn't been far from my mind during an election campaign marked by low-quality debate about public finances.

NHS funding is just one of many prisms of a political class trapped in terminal timidity about telling us the truth.

The public and the private
This poverty of fiscal discussion follows a broader political and social failure to distinguish between public goods and private goods.

For their many imperfections and intrinsic need of regulation, competitive markets seem the most efficient means of providing private goods. (Yes, there are huge failures within this generalisation: the UK housing market being perhaps the most glaring.)

One consequence of our becoming a more financialised, globalised nation in a more financialised, globalised world is that it is easy to forget that there is a meaningful distinction between what we decide are public goods and private goods.

Christopher Hood's new public management theory believes that the three Ms - markets, management and measurement - can modernise and make more efficient the public goods provided by the public sector. Jonathan Boston's delineation of the difference between the public and private sectors should offer us salutory caution about how much learning is automatically transferrable from the world of private goods to that of public goods.

They’re promising more money …
All the serious major Westminster parties are promising the NHS more money. The Tories and Lib Dems have gone the whole hog of offering The Messiah Simon Stevens his requested £8 billion a year by 2020; Labour has offered a mere £2.5 billion a year.

This feels curiously like a reverse auction. Labour’s lead on the NHS as an issue is huge, so it could be argued that they feel an implicit ‘trust us to do the right thing’ message will transmit automatically, allowing them to wear the fiscally tough costume of Stafford Cripps.

It also feels rather unreal. Ipsos MORI’s final Economist Issues Index before the election reports that those surveyed consider the NHS to be the biggest issue by some margin: 47% putting it as the nation’s top issue, up 9% since the March data. That’s a big change.

… and we know it needs more money …
It’s scarcely a radical insight to point out that the NHS needs more money. Its current deficits in the liberated zone of the foundation trust sector and non-FT sector are impressively large.

Monitor notes that “growth in operating costs continued to exceed the growth in revenue. The under-delivery of cost improvement programmes also had an adverse impact on the sector’s financial performance … trusts spent £419 million more on staff than planned because of high use of contract and agency staff”.

NHS Providers’ head of analysis Siva Anundaciva told HSJ “over half the foundation trust sector is in deficit, including trusts with good financial track records, and the size of the foundation trust sector deficit is likely to reach £400m by the end of 2014/15”.

Recent analysis from the FT’s Sally Gainsbury has found that “NHS hospitals and other providers finished 2014-15 with hidden deficits approaching £1.6bn and face a further £2.3bn black hole this financial year”. It concluded that NHS providers’ predicted £823 million overspend by the end of the 2014-15 financial year last month “do not include the £750m these organisations had received in emergency financial support from the Department of Health by December. Those crisis loans must be repaid and are not available on a recurrent basis”.

Gainsbury also noted that the planned 3.5% efficiency saving in the ‘enhanced’ (ahem) tariff is 1% more than the FT provider sector achieved last financial year.

Last November, Gainsbury worked with the Nuffield Trust to remodel financial forecasts using NHS England’s methodology, which show that ”the amount the NHS spends per patient will fall by at least £98 by 2020 under funding pledges made by each of the main political parties … spending measured on health officials’ preferred measure – estimated patient numbers, which take account of the fact that as people age, they get sicker – has already dropped by £50 per patient since 2009.

“Under the Conservative Party’s current pledge to freeze NHS spending in line with GDP inflation, that fall would tumble further to £191 per patient – or 9 percent from £2,021 in 2009 to £1,831 in 2020 … Under the Liberal Democrats, funding would fall by £174 per patient between 2009 and 2020, while under Labour’s pledge it would fall by  £148”.

No surprises
We have seen this overspend coming from a long way, of course. The Kings Fund’s ”>quarterly monitoring report and survey of finance directors has been a key tracking tool. There has been important work on present and prospective NHS funding from the Nuffield Trust and the Health Foundation

It’s deeply unsurprising. Former NHS England Comrade-In-Chief Sir David Nicholson added his voice to those warning that the issue is being ignored last month. Nicholson also called for the £8 billion to be available immediately after the election, rather than by the end of the next Parliament.

Iridescent chief economist of the Kings Fund Professor John Appleby has pointed out that without lower-than-forecast inflation, honouring the Coalition’s pledges on increase real-terms NHS funding would have cost more.

Only The Commissioning Messiah can save us now!
As I pointed out previously, we have chosen to move the deficits in the NHS from the commissioner side to the provider side.

So even though most providers are in deficit, we shouldn’t worry because NHS England’s playing hardball in its specialist commissioning tariff using the Project Diamond funding (which incidentally allowed it to enforce a data collection system), and the leant-on frugality of CCG-Land will help the NHS overall to land in a happy place, won’t it?

Um, no.

Specialised commissioning overspent by £450 million last financial year, we should remember. CCGs forecast a modest £135 million surplus for the quarter to January 2015: that included the £250 million top-sliced for continuing care liabilities, which will continue to flatter the position for 2014-15. However, CCG sources are clear that this money will (finally) be paid out in 2015-16.

CCGs are also telling acute providers they cannot afford to fund agreed delayed discharge schemes, suggesting that the situation has deteriorated since the last available financial data to January.

What do we want? Investment and reform! When do we want it? Now!
An’ I say, “Aw come on now
You must know about my debutante”
An’ she says, “Your debutante just knows what you need
But I know what you want”
Bob Dylan, ibid

So the NHS is going to need more money, pretty much immediately. This has a bunch of implications.

One should be that we could save ourselves time assuming that various bad or irrelevant ideas masquerading as cash-releasing efficiency gains will do much.

Improving procurement will totter out of the policy closet again. It’s meant to have saved £1.5 billion by this financial year, in a completely unevaluated kind of way.

Selling off surplus land assets almost certainly won’t raise much; will depresses the property market if done proximately in time; and is non-recurring - but some people might get excited about that too.

Extending waiting times will be mentioned, but it just defers money rather than saving it (and not a lot of money at that) - and unless patients die, the care still needs to be delivered. Both a crackdown on health tourism and user charges will also do the health policy zombie ‘bad idea boogie’ again.

And if any policymakers feel like being really unpopular, they could always suggest to their political masters that they could cut NHS staff pay …

2006 and all that
We could also learn from previous NHS financial recovery. The 2006 retrenchment provides depressing lessons. The ‘Choosing Health’ public health funding was raided, as were the strategic health authorities’ multi-professional education and training budgets, with consequences for the NHS workforce that we have seen over recent years.

Barry McCormick’s review for DH is a long read: importantly, it does not blame the new national contracts, preferring to highlight the prohibition of capital-to-revenue virement, and the concentration of deficits in the south indicating a likely correlation with the difficulty of achieving waiting targets in areas with higher market forces factors and cost of living.

It’s interesting that this is no longer available on the DH archive site, as McCormick's point absolving the new national contracts refutes a frequent attack line of health secretary Jeremy Hunt’s.

The Treasury ‘heart’ the NHS
So, yes, it’ll need more money. Which the Treasury are going to hate, the more so as fiscal austerians have been strongly in the ascendant during the Coalition’s reign.

If the NHS in England does get more money, then there are Barnett increment consequentials: Scotland, Wales and northern Ireland all get the requisite funding formula uplifts, making it more expensive than it seems.

And depending on the outcome of the election, the Treasury mindset could still win.

And if it does, we will very quickly see the NHS restructuring to end all restructurings. The TDA’s allegedly un-finalised ’death list’ will just be a starting point. The 2006 ‘Our Health, Our Care, Our Say’ review might belatedly happen at the barrel of a political gun, with no money. That’d be bound to work well.

A double-Steve Austin
So we must hope wise political heads can find the money from somewhere.

How much do we need? Given The Messiah’s US interregnum, a ‘double-Steve Austin’ should do it. (Steve Austin was The Six Million Dollar Man, and Simon Stevens’ £8 billion ask is about $12 billion).

(And yes, I transposed billion for million: probably accurate, given healthcare cost-inflation since the 1970s.)

£8 billion a year, for what’s probably five years.

The £2 billion deficit outlined by Sally Gainsbury represents an accurate snapshot of the proper cost of running the NHS as it is.

And we want the NHS to work differently, and with more integration – and integration costs before it pays.

However, the money needs to come with hawser-like strings, and some preconditions.

The first is funding reform. As I have discussed, the MBAsturbation of market mechanisms does not fit with the level of funding anyone seems likely to offer the NHS any time soon. The HSJ Commission on Hospital Care For Frail Older People highlighted that the narrative assumptions of the current system are market-and-choice-based, where we appear to be willing only to fund a planned system. Something’s got to give.

NHS payment mechanisms are therefore not fit for purpose. The NHS is basically just a national pot of money to be spent on healthcare. Tariff probably can’t adapt fast enough to keep up with the best providers and adequately incentivise the worst. We need to keep the financial transparency - and yes, choice - that came with this, but HMO-style budgets for health economies seem inevitable. (Oh, and changing funding mechanisms means creating winners and losers. I never said this would be easy.)

So once we take off the £2 billion needed to balance the system as it is, we need to split the remaining £6 billion between a transformation fund (as widely suggested, but let’s call it the more accessible ‘New Ways Of Working Fund’) and a capital fund for new community premises. Most GP surgeries can’t physically expand: too many are in converted residential property.

In paying off existing deficits, we need a quick, dirty and accurate review of those health economies that have to get subsidy to keep full-service provision and those where services can be withdrawn. A group of the wisest heads in the NHS could do this pretty quickly, informed by experts in demographics and traffic. This has to happen more or less immediately, perhaps using Lib Dem Norman Lamb’s suggestion of a cross-party commission, meeting in public and online. Again, there will be winners and losers.

£8 billion a year is 2p on the basic rate of tax. It’s not nothing, and it’s not a lot. And yes, I know that other parts of government need money, too. But I’m not writing about them.

PoliticsLand and PolicyLand will have to work together to deliver The Builder’s Message to the public about the NHS and indeed public services in general: ‘fast, good and cheap – pick any two’.

The NHS could be a good vehicle to drive this conversation: it’s the public service that we can all imagine ourselves needing in the future.