Preparing the NHS in Wales for the future

26 Oct 16

The NHS in Wales is set to receive a funding boost next year, which must be used to deliver sustained improvements in performance and patient outcomes as well as maintaining day-to-day services.

The recent Welsh Government draft budget shows health taking around 50% of the total Welsh resource DEL (Departmental Expenditure Limits) from 2017-18, resulting from a cash uplift of 4.4%. It is perhaps not surprising that other public service leaders are looking enviously on at what appears to be a very generous settlement.

In isolation the 2017-18 settlement for health is certainly better than expected and better than anticipated in the recent The Path to Sustainability report by the Health Foundation, which assumed an average annual 0.7% real terms up to 2019-20. But this needs to be considered in the wider context of the current level of unmet demand in the system, the impact of an ageing population with increasing complex health needs and the significant increase in volume of services provided with an aged physical and technological infrastructure that is not configured or resourced for the demands of today. To those outside the NHS that might sound like whining, but the facts are that as a country the UK spends a smaller proportion of its gross domestic product on health care than countries such as the US, Canada, Portugal, France and the Netherlands (according to OECD Health Data 2015) and for what we spend the value we extract is high. 

The Health Foundation report argues that in the long term (ie 2031) the NHS in Wales is sustainable as long as: funding increases in line with GDP year on year (assumed average 2.2% real terms); the NHS continues to make efficiency savings of at least 1% every year; and the level and range of services stay the same. There are some significant risks to these assumptions – medical, pharmaceutical and technological advances alone will add significant financial pressures year on year.

While the Welsh Government’s budget for 2017-18 was better than expected, we will have to see on 23 November what the Autumn Statement has in store. If there is no change to current plans, then UK spending as a percentage of GDP is on track to fall further by 2019-20 with the Welsh DEL seeing a noticeable real terms cut in 2018-19. As such the financial outlook for the NHS and other public services in Wales is far from certain. The impact of Brexit on the UK economy is a further factor that will inevitably feed through to public finance in the coming years.

In the meantime, NHS leaders are acutely aware that additional funding for the NHS means less funding for other public services, many of which have an important contribution to make in supporting the health and wellbeing of the population. The recent Institute of Fiscal Studies report: Welsh Budgetary Trade Offs to 2019-20 presented a number of possible scenarios, all of which will involve difficult choices for politicians, public service leaders and the public in the years ahead. 

The challenge is how to maximise allocative efficiency across the whole devolved system in Wales to ensure that we are getting the most value (that is achieving the best outcomes) from our investment.  As a country we have the advantage of size (and the governance arrangements in place) to enable public sector leaders and politicians to work together on the whole system of health and care in Wales. The last two years alone have seen the introduction of a number of ground breaking pieces of legislation including the Social Services and Well Being (Wales) Act 2014 and the Well Being and Future Generations (Wales) Act 2015. This legislation recognises the fundamental interdependence between health and other public services, particularly social care. 

Both the Health Foundation report and the recent State of Care report by the Care Quality Commission in England make the case for sustained investment in social care and NHS leaders in Wales share that conclusion. While social care budgets in Wales have not been as hard hit as in England, the impact is beginning to be felt and it was welcome that the draft Budget protected social care funding in Wales in 2017-18. In addition to driving efficiency and developing new service models to deliver better outcomes, funding for social care will, as with health, need real terms growth year on year to keep pace with demand.

In the short term, there is a clear expectation from Welsh Government that Welsh NHS leaders will use the funding provided next year to go beyond just keeping the ship afloat to deliver sustained improvements in performance and patient outcomes.  The NHS will work hard to achieve this by continuing to drive out technical efficiencies and maintaining pay restraint. But, to build a genuinely sustainable health and care system in Wales will require more than a cash uplift to annual budgets.

The long term sustainability of the health and care system in Wales will depend on sustaining not just the NHS, but other services too. It requires: a long term vision for the whole system; greater investment in prevention and public health; shifting resources from the acute sector into multi-disciplinary primary and community services; investment in the health and care workforce; and the application of a Prudent Healthcare approach.

Further discussions of the finances of the NHS in Wales  will take place when Vanessa Young speaks at CIPFA Wales’ conference in Cardiff on 24 November

  • The NHS in Wales is set to receive a funding boost next year, which must be used to deliver sustained improvements in performance and patient outcomes beyond existing day to day services.
    Vanessa Young

    Vanessa Young is director of the Welsh NHS Confederation and a CIPFA member

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