The NHS has more money than ever before, so why can't it cope?

It's not true that health spending has been cut - funding has actually risen. But health trusts still can't cope with demand

Dominic Lipinski/PA Wire NHS

Spending on the NHS has increased - so why are our hospitals in trouble?

New performance figures showed the NHS in England had once again missed its target for treating or discharging A&E patients within four hours, with performance dropping to its lowest level for a decade.

Just 91.8% of patients were seen within four hours between January and March, when the target is 95%.

And a new report has warned that health trusts are spending more than they can afford, and the NHS is projected to overspend by £626m by the end of 2014/15.

Even with extra health funding, the NHS has struggled to cope with growing demand for its services.

And our hospitals have become less efficient - meaning it costs them more to deliver the same services - because of an increasing reliance on expensive temporary staff.

This is partly a result of a determination not to repeat the mistakes made at Stafford Hospital, the hospital run by Mid Staffordshire NHS Foundation Trust, where a public inquiry found that “an insidious negative culture involving a tolerance of poor standards” had contributed to “appalling suffering of many patients”.

The fact is that health funding has increased since the last election in 2010.

Shadow Chancellor Ed Balls (right)and Shadow Health Secretary Andy Burnham
Shadow Chancellor Ed Balls (right)and Shadow Health Secretary Andy Burnham

An analysis by think tank The King’s Fund concludes that over the five years of the Coalition government, English NHS funding will have increased by around 0.8 per cent per year on average – an additional £890 million a year in real terms.

Critics of the Government would point out that the Conservatives promised to increase funding in real terms every year, a pledge also adopted by the Tory-Lib Dem Coalition, but spending actually fell by 0.7 per cent in 2010-11.

However, it rose in other years, and this more than made up for the 2010-11 cut. Overall, NHS spending is up.

So what’s the problem?

For one thing, the NHS requires funding increases simply to keep up with increased demand. More people need treatment as the population increases and as we live longer, which means there are more older people in our communities.

Improving medical technology also means that better treatment is possible - and people expect to receive it. But this costs money.

The Kings Fund estimates that an extra three to four per cent funding each year is needed just to meet higher costs of new medical technologies and increases in demand for health care.

A new report by charity The Health Foundation had different figures but also highlighted a gap between rising costs and the extra funding the NHS has enjoyed.

It said: “The deterioration in NHS provider finances is the result of their operating costs (staff costs, drugs costs, premises expenses, etc) rising more rapidly than the income they receive from the commissioners of care – clinical commissioning groups and NHS England.

“In 2013/14, NHS providers’ operating costs rose by 1.9% (£1.4bn) while their income only increased by 1.0% (£0.7bn).”

2015 General Election - Labour Party poster adapting the famous Saatchi Tory poster of 1979
2015 General Election - Labour Party poster adapting the famous Saatchi Tory poster of 1979

This helps to explain why the NHS faces financial problems despite enjoying an increase in funding.

The Health Foundation warns that the NHS is projected to overspend by £626m by the end of 2014/15.

It said: “The financial performance of NHS providers in England has deteriorated sharply since 2013, from a net surplus of £582m in 2012/13 to a net deficit of £789m at the end of Q3 of 2014/15.”

And it highlighted the problem of spending on temporary staff, as hospitals apparently race to increase staff numbers as a result of the Stafford Hospital scandal, which has focused attention on care standards.

The charity said: “Spending on temporary staff grew by £1bn (27.8%) in 2013/14 and continues to rise.”

Spending on temporary staff makes up 7% of all staff spending in the North East, the charity’s report found.

But the trouble is that temporary staff cost more than regular doctors and nurses. To put it another way, employing temporary staff means hospitals get less value for their money.

Anita Charlesworth, chief economist at the Health Foundation, warned in a blog post: “The big factor pushing up costs is rising spending on staff, and most specifically temporary staff.”

There’s another problem too.

Funding for adult social care, often provided outside of hospital to the elderly, people with a disability and people with a long-term illness, has been cut significantly.

This is the responsibility of local government rather than the NHS.

A Kings Fund report published in October warned funding has been cut by 12 per cent since 2010 - even taking into account extra cash for social care provided by the government.

Councils have dealt with having less money to spend by making social care available to fewer people, but this puts extra pressure on hospitals, who often end up treating patients who might otherwise have been cared for at home.

In the course of this election, the parties are competing over who will spend the most on the NHS.

In October last year, Simon Stevens, the head of NHS England, published a report warning the NHS actually needed an extra £8 billion a year, in real terms, by 2020.

But experts such as The Health Foundation say this is the bare minimum required, because it assumes it will also be possible to make efficiency savings of £22 billion (to tackle a total predicted funding shortfall of £30 billion).

Liberal Democrats and the Conservatives both claim they will be able to find this £8 billion.

It remains to be seen how exactly this will be paid for.

Labour actually makes a less ambitious offer, saying it will find an extra £2.5 billion to by clamping down on tax avoidance schemes; raising tax on high-value properties worth more than £2 million and introducing fees on tobacco companies.

Andy Burnham, Labour’s shadow health secretary, argues that Labour is “the only party that has put a specific measure on the table” while the others have made “a vague commitment to it”.

While all the parties are competing to prove who loves the NHS most, there’s no sign that any of them are willing to talk openly about just how they will raise the money needed to fund it in the future.


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