2 Funding for health and social care;
the story so far in this Parliament
Context
9. Health service planning in this decade is
taking place against the background of unprecedentedly constrained
resources. Furthermore the effect of these constraints on health
spending is being compounded by the impact of even tighter financial
constraints in local authority social service departments. There
is a clear risk that social service spending constraints will
impede the development of the community-based services which are
required to provide improved care and support within the community;
failure to develop such services would critically undermine both
the quality of care provided to individual citizens and the ability
of the system as a whole to respond to increased demand.
10. The Committee welcomed the announcement in
the 2010 Spending Review that by 2014-15 £1.0 billion of
NHS spending per year would be transferred, subject to controls,
to social care authorities.[4]
This institutionalised resource transfer reflects a system-wide
requirement to refocus priorities on care and support and early
or preventative interventions. The argument in favour of this
resource transfer is sometimes expressed as being a "requirement
to save money in the acute sector". This formulation misses
the point. It is certainly true that effective early diagnosis
and intervention relieves pressures in the acute sector, but such
relief comes about through a reduced incidence of acute illness.
In other words the case for shifting the focus towards community
based services, and safeguarding the development of social care
is rooted in the desire to improve outcomes for patients - it
is not a crude exercise in "saving money".
11. As was the case last year[5],
however, we received evidence that the money transferred from
the NHS to social care authorities was in part used to subsidise
the current level of service rather than to provide new services.
The NHS Confederation told us that just over 18% of the money
transferred in 2011-12 was used to maintain eligibility criteria[6],
while the LGA and ADASS quoted the ADASS budget survey showing
that "in 2012-13, £284 million [of money transferred
from the NHS] has been used to offset pressures and cuts to services,
£148 million has been invested in new social care services
and £149 million has been allocated to working budgets"[7].
12. We received substantial evidence from a number
of sources about the financial challenges facing NHS bodies in
the Spending Review period. The NHS Confederation confirmed that
the anticipated pressures on the NHS in that year had materialised:
in a survey of 252 chairs and chief executives of NHS bodies represented
by the Confederation which was undertaken in April and May 2012,
it reported that 28% of respondents had described the current
financial position as "the worst they had ever experienced"
while a further 46% had said that the position was "very
serious".[8] 85% of
those surveyed expected financial pressures to get worse in 2012-13.
13. The Confederation indicated the principal
drivers of upward cost pressures:
A significant proportion of the inexorably rising
demand for healthcare is caused by demographic pressures. We have
both ageing populations requiring more care for longer as they
live with an increasing burden of disease and a birth rate which
has risen by 22% in a decade. Demographic pressures are likely
to cost the NHS around £1.1-1.4 billion extra each year (at
2010/11 prices) up to 2017.[9]
Demand for care would be further increased by "lifestyle
risk factors, such as poor diets, and the resulting illnesses;
more effective treatments for seriously ill children, meaning
some survive to adulthood with multiple disabilities and complex,
expensive care requirements; and patients' growing expectations
as treatments and technologies advance.".[10]
14. The Foundation Trust Network reported to
us the outcome of a survey of its member Trusts, which found that
providers in the foundation trust sector were experiencing "significant"
increases in demand and significant pressures from rising costs
of pay, drugs and supplies and demand for non-elective treatments.[11]
NHS resources beyond 2014-15
15. Successive governments have attributed a
high priority to the development of health and care services with
the result that they now represent by far the largest public service
commitment of taxpayer resources, and they are therefore inevitably
affected by the political choices made by Government. Although
decisions about public expenditure levels and priorities beyond
2014-15 remain open, and will ultimately be the responsibility
of the next Parliament, the Committee received no evidence to
indicate that there is likely to be any significant increase in
public expenditure on health and care services after the end of
the present Spending Review period. Financial projections arising
from the Chancellor's 2012 Autumn Statement do not indicate any
scope for loosening of present fiscal disciplines, and we doubt
that any spending review conducted in this Parliament will result
in significantly greater allocations to the Department of Health.
Equally, we see no evidence for the levelling off of demand for
health services and the upward cost pressures on the NHS outlined
above.
16. The present QIPP plans submitted by NHS bodies
cover efficiencies to be made - equal or better services to be
delivered with fewer resources - up to 2014-15.
In our view it would be unwise for the NHS to rely on any significant
net increase in annual funding in 2015-16 and beyond. Given trends
in cost and demand pressures, the only way to sustain or improve
present service levels in the NHS will be to continue the disciplines
of the Nicholson Challenge after 2015, focusing on a transformation
of care through genuine and sustained service integration.
Our general findings
17. As we concluded in January 2012, the system
will only respond successfully to the Nicholson Challenge if it
is committed to making fundamental changes to the way care is
delivered. We see no reason to vary this conclusion, and we note
that the National Audit Office, in its December 2012 report on
progress in making NHS efficiency savings, also observed that
"there is a broad consensus that changing how health services
are provided is key to a financially sustainable NHS".[12]
18. The NAO made the following observation on
the nature of the efficiency savings being made to date:
Evidence indicates that the NHS has taken limited
action to date to transform services. There are a number of challenges
to delivering service transformation. Changes take time to implement
and may initially cost, rather than save, money. In 2011-12, the
proportion of cash-releasing savings reinvested in transforming
services varied and there is no evidence of a shift in staff from
the acute to the community sector.[13]
19. The evidence presented to
the Committee demonstrates that the measures currently being used
to respond to the Nicholson Challenge too often represent short-term
fixes rather than the long-term transformations which the service
needs.
SOURCES OF EFFICIENCY GAINS
20. The Department told us that in the first
year of the efficiency programme £5.8 billion of efficiency
gains had been made. The NAO concluded that £3.25 billion
of the total claimed savings of £5.8 billion[14]
were either generated by reducing tariff payments to NHS Providers
or they were the consequence of the public sector pay freeze.[15]
21. The NAO also calculated that around £520
million of the savings for 2011-12 were one-off savings, meaning
"the NHS will have to find replacement savings in future
years", as the efficiency target is based on recurrent savings.[16]
The Department accepted that this was the case, and did
not in its initial evidence to us give a figure for the saving
from transformational change for this first period:
NHS performance in 2011-12 was strong, with savings
delivered through central actions on pay, administration savings
and on improvements in organisational efficiency, levered through
the tariff. The NHS always recognised that, in order to sustain
the pace of progress, savings in the later years of the QIPP period
will need to be increasingly focussed on service transformation.[17]
22. Since we took evidence from the Secretary
of State and Department of Health officials in November 2012,
the Department have told the Public Accounts Committee that aggregate
efficiency gains attributable to transformational change amounting
to £875 million will have been made by the end of the second
year of the programme in March 2013.[18]
23. Although the Department told us that "the
Government has been clear that savings from transformational change
will be weighted towards the later years of the Spending Review
to ensure that appropriate clinical leadership and local engagement
takes place",[19]
it is not clear to us how sufficient gains can be made in
the last two years of the Spending Review period without a significant
step-change in the approach of the Department and the NHS to achieving
service transformation.
24. Although it is certainly
true that public sector pay restraint has the short term effect
of reducing the cost of service provision to the NHS budget, the
Committee does not accept that can be regarded as a sustainable
form of efficiency gain. Sustainable efficiency gain involves
securing improved quality or value for a given expenditure - it
is not delivered by simply suppressing staff salaries alone.
25. Still less is efficiency
gain secured for the NHS by reducing the tariff paid by an NHS
Commissioner to an NHS Provider. Tariff payments are internal
transfers; they only result in efficiency gain for the NHS if
the NHS Provider changes the way care is delivered. The Committee
is concerned that it has received insufficient evidence of such
service change by NHS Providers; it is also concerned that both
NHS Management and ministers appear to be convinced that changing
an internal transfer payment constitutes a form of efficiency
gain.
INTEGRATION OF HEALTH AND SOCIAL
CARE
26. The one approach that appears to provide
an opportunity to make a significant difference, both in the quality
of the service delivered and in leveraging the funding needed
to provide quality services, is to see health and social care
as one service, not two, and commission and provide them accordingly.
This is a conclusion the Committee has reached previously and
often.
27. In our January 2012 report on public expenditure,
we said:
While the separate governance and funding systems
make full-scale integration a challenging prospect, health and
social care must be seen as two aspects of the same service and
planned together in every area for there to be any chance of a
high quality and efficient service being provided which meets
the needs of the local population within the funding available.[20]
28. We pursued this theme, in our February 2012
report on social care. The Committee concluded in that report
that integrated services need a fully integrated approach to commissioning
in each area, with the precise model depending on local circumstances.[21]
29. On funding, the Committee quoted the Dilnot
Commission's view (specifically in relation to older people) that
separate funding streams for heath, social care and welfare mean
that resources are allocated inefficiently, and said that:
At a time of scarce resources and rising demand the
Committee believes that this structural inefficiency, which has
been recognised for decades, can no longer be ducked. Too much
is spent treating preventable injuries like falls, which can have
a catastrophic impact on the lives of older people, some of whom
may never regain independence again. If we are to create a sustainable,
high quality support system for older people, commissioners need
to rebalance the entire expenditure on services for older people
across the NHS, social care, housing and welfare. This will be
a process, rather than an event; the purpose of creating integrated
commissioners, is to create agents within the system who have
both the ability and the incentive to drive the necessary process
of fundamental change in service provision.[22]
30. Our recommendation was made in reference
to services for older people, but the principle stands for health
and social care provision in general. At
a time when steadily rising demand for health and care services
needs to be met within very modest real terms funding increases
for the NHS and even tighter resource constraints on social care,
the Committee remains convinced that the breadth and quality of
services will only be maintained and improved through the full
integration of commissioning activity across health and social
care.
31. In the sections below, the Committee comments
on Government funding for the NHS in 2011-12, evidence of the
efficiency gains being made, and on ways of integrating funding
and services.
4 HM Treasury, Spending Review 2010,
October 2010, Cm 7942, paragraphs 2.10 and 2.14-15, and Table
2.3. Back
5
Health Committee, Public Expenditure, HC 1499, paragraph
85. Back
6
Ev 105 Back
7
Ev 108 Back
8
Ev 100, paragraph 2.2 Back
9
Ibid., paragraph 2.3 Back
10
Ibid. Back
11
Ev 81 Back
12
National Audit Office, Progress in making NHS efficiency savings,
13 December 2012, HC 686, p8 Back
13
Ibid. Back
14
Ev 60, paragraph 4 Back
15
Progress in making NHS efficiency savings, p6 Back
16
Ibid. Back
17
Ev 70, paragraph 7 Back
18
Evidence taken before the Public Accounts Committee, 14 January
2013, HC 865-i, Q 54 Back
19
Ev 61, paragraph 11 Back
20
Health Committee, Public expenditure, HC 1499-I, paragraph
13 Back
21
Health Committee, Social Care, HC 1583-I, paragraph 36 Back
22
Ibid., paragraph 76. Back
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