The writer is a senior policy analyst for the Nuffield Trust, a think-tank
The prime minister and his health secretary may have presented the abolition of NHS England as a move to democratise the NHS — wresting control away from bureaucrats and back to ministers. But the issue at the heart of the move was, and will remain, the money.
When the 42 integrated care boards (ICBs) responsible for balancing NHS budgets across England submitted their plans for the financial year that starts in April, they anticipated missing the mark by some £6.6bn.
This week’s announcements to halve staff numbers across NHS England and the Department of Health and Social Care, with similar cuts in ICBs, might at best plug a quarter of the gap — putting aside the substantial cost of redundancies. But Wes Streeting, the health secretary, will be hoping the shock move underlines how serious he is about eliminating NHS inefficiency to close the remaining £5bn gap.
His problem is that, although there doubtless is some inefficiency, the more significant driver of its troubles is the 2025-26 funding allocated to the health department in the Budget, which adds up to around 1.5 per cent real terms growth on the previous year. That is less than half the long-term average rate of growth in NHS funding, and only marginally above that of population growth adjusted for demographic change.
Casual observers of the public finances might balk at the notion that a funding package covering inflation and population growth, as well as the higher healthcare needs associated with ageing, could be considered “tight”. But economists — including those in the Office for Budget Responsibility — have long recognised that healthcare globally differs from other sectors and services.
While technological advance elsewhere tends to reduce costs, in healthcare it increases them by expanding what treatments are possible. As a consequence, it also expands what the public expects to receive. So the NHS — and patients — have fairly successfully thwarted government attempts to contain spending within original plans. In reality, healthcare consumption tends to grow at more than twice the rate of population growth.
Over the past 15 years, successive governments’ failure to accept that reality has resulted in the NHS lurching from one in-year financial bailout to the next. This has been disastrous for planning. When original budgets are unrealistic, hand-to-mouth measures prevail; “efficiency” initiatives focus on short-term, non-recurrent savings; and funds initially ringfenced for investment in prevention or productivity improvements are raided to pay for the relentless rise of patient demand — which everyone knew would come, but politicians pretended would not.
Where then does this leave Streeting, freshly affirming that the NHS buck stops with him? He has two main courses of action, but neither is politically easy. He could level with the Treasury and taxpayer about the realities of demand, or level with the public about how much rising expectations can be met through state coffers.
The global economic outlook suggests the appetite for the first will be limited, although the public consistently say they support higher taxation to fund the NHS. The second would involve confessing to the public that the NHS — like all healthcare systems — involves rationing. This can happen in a planned, proactive way — through engaging with the public on which are priority treatments and outcomes (and more importantly which are not) — or haphazardly and reactively, as now. This results in millions on waiting lists and wide inequalities. Access to care is too often determined by who shouts loudest or what new treatments pharmaceutical companies choose to invest in.
Streeting has shown bravery in making the move to close NHS England — despite earlier proclamations against top-down structural change. But the more significant test of his mettle is yet to come.
