Budget and pay warnings highlight NHS pressures

4 Nov 10
A row over the NHS's four-year spending settlement and fears over pay this week brought into focus the financial pressures faced by the health service

By David Williams

4 November 2010

A row over the NHS’s four-year spending settlement and fears over pay this week brought into focus the financial pressures faced by the health service

Shadow health secretary John Healey claimed that the NHS would suffer a real-terms funding cut over the Comprehensive  Spending Review period if the additional £1bn for social care promised from the Department of Health budget was excluded.

In the CSR, the government said the NHS would have a 0.4% year-on-year real-terms rise for the next four years. The settlement also handed an extra £1bn of DoH cash to councils to be spent on social care.

But Healey suggested ministers were double-counting the social care allocation. Figures from the Nuffield Trust and House of Commons library show that the NHS budget would drop by £500m by 2014/15 without the social care cash, he said.
This provoked a standoff with Health Secretary Andrew Lansley, who on November 2 maintained that the ‘there would still be an increase in the resources available to the NHS in real terms each year’.

Anita Charlesworth, chief economist at the Nuffield Trust, agreed with Healey’s claims that the NHS was facing a real-terms cut. But she nonetheless welcomed the social care spending as ‘good value for money’ in terms of reducing avoidable hospital admissions and cutting bed-blocking.

Andy McKeon, managing director of health at the Audit Commission, said it was ‘something of an academic argument at the margins’, and that the NHS had long spent some of its budget on social care through joint financing.

He told Public Finance: ‘What really matters is the £84bn a year that goes to PCTs, and whether there will be real-terms increases there. That’s what needs to be watched closely.’

Meanwhile, John Appleby, chief economist at the King’s Fund, told MPs that the NHS would face ‘tremendous’ pressure to implement pay rises in years three and four of the CSR period – despite near-static funding settlements.

Ministers plan to freeze pay for all but the lowest-paid NHS staff in 2011/12 and 2012/13, on top of freezes already in place for GPs and consultants.

Giving evidence to the Treasury select committee on November 1, Appleby said: ‘The pressure within the service for pay rises will be tremendous. Staff will be in an economy which will be improving, there will be higher inflation, so the value of their pay packet will be going down in real terms.’

Alan Maynard, professor of health economics at the University of York, agreed that 2013/14 would present a ‘test of [the coalition’s] political resolve’.

The Royal College of Nursing confirmed that it would be looking to secure a pay rise in 2013/14. Josie Irwin, head of employment relations, said the RCN would be pressing for a settlement that compensated for the real-terms losses caused by the pay freeze.

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