October Budget 2024: Welcome funding, clarity and detail needed

Chancellor Rachel Reeves delivered her first Budget this week, with headline increases in tax, borrowing, and NHS funding. Analysts welcomed these developments but warned they could only be a downpayment on the government’s plans for reform; and that much more detail is needed on the role that technology and digital will play.

In the run up to October’s Budget, Sally Gainsbury from the Nuffield Trust noted that it’s hard to get a handle on how much the NHS spends, what it spends it on, and how much (more) money it really needs.

Baselines change, as unrealistic budgets are set and topped-up in-year. Money is transferred from national and capital programmes to the “frontline” (something that impacts the technology sector, for which multi-million programmes are frequently announced but rarely delivered in full).

“The resulting lack of transparency is not merely a frustration for analytics and policy wonks,” Gainsbury wrote in a blog. “It is a problem for government and ultimately the public” because the “most basic facts” about funding and its allocation “remain obscured.”

Headline figures

This problem was hardly resolved by Chancellor Rachel Reeves’ Budget on 30 October. Her long speech (Guardian live blog) raised taxes by £40 billion and borrowing by £70 billion to fund public services and infrastructure investment in the hope of kickstarting growth.

And it concluded with two headline statements on the NHS. First, day-to-day spending will increase by £22.6 billion this year and next. And second, capital spending will rise by £3.1 billion next year, taking the capital budget to £13.6 billion.

The baseline problem

Reeves’ £22.6 billion is being added to an NHS England baseline that is already considerably higher than the one outlined in March. When former chancellor Jeremy Hunt delivered his spring Budget, the Treasury ‘red book’ said NHS England’s funding for 2024-5 would be £165 billion.

The official Treasury documents released this week say it will be £181.4 billion, including Reeves’ £10 billion injection. It’s not totally clear where the rest has come from, but it’s likely to be a combination of Treasury reserves, in-year transfers from other budgets, and funding for initiatives to deliver Labour’s election promises.

The Office for Budget responsibility says it wasn’t told about a £3.5 billion transfer to health and local government this spring, which added to the £20 billion ‘black hole’ Labour says it uncovered after the election.

While the Health Service Journal has worked out that Labour has taken almost £1 billion from March’s capital allocation to cover pay and technology revenue pressures (so, while the capital budget will increase next year, it is down on what was planned in March this year). HSJ has also worked out that the headline increase includes £1.8 billion for waiting list initiatives announced back in July.

A big boost, with a lot to cover

The Treasury says this year’s boost to revenue spending “will reduce waiting times by supporting the NHS to deliver 40,000 extra elective appointments a week and make progress towards the commitment that patients should expect to wait no longer than 18-weeks from referral to consultant led treatment.”  

But it’s going to have to do a lot more than that. Before the Budget, the NHS was looking at a financial deficit this year of around £4.8 billion, and NHS England was urging systems and trusts to cut staff and even services to cover it (just this week, Unite the Union announced that staff at Guy’s and St Thomas’ NHS Foundation Trust will strike over plans to more than halve the size of its facilities and capital development teams).

Some of this funding pressure has come from Reeves’ decision to award Agenda for Change staff an inflation-busting pay increase and to settle the junior doctors’ strike. And this could be compounded by her decision to increase the minimum wage and raise employer National Insurance contributions. So, as things stand, it’s unclear how much money will be available for new developments.

This Budget won’t be the last word

Commenting on the Budget, Siva Anandaciva, chief analyst at the King’s Fund, said that against the “backdrop of dire NHS performance and extremely tight public finances” the uplift would help to sustain services. However, he warned that it is “unlikely to be enough for patients to see a real improvement in the care they receive” because it “will also need to cover existing commitments for new pay deals and rising costs of delivering care.”

Similarly, Matthew Taylor, chief executive of the NHS Confederation, described the Budget as “an important first step on putting the NHS back on a sustainable footing” but it could only be a “down payment on the government’s planned NHS reform.” Another phase of investment will have to come alongside the 10 Year Health Plan, which is now expected early next year.

Capital promises in March

Back in March, Hunt made investment in NHS digitisation a feature of his spending statement. He promised £3.4 billion for capital investment over the three years to 2028-9 and the red book set out a fairly specific list of commitments for spending the money.

It said £430 million would go on access and services for patients, including the NHS App, while £1 billion would be spent on “reducing the time spent on unproductive administrative tasks” by automating back-office functions and rolling out the Federated Data Platform, and £2 billion would go on infrastructure, electronic patient records, “scanners with AI” and digitising transfers of care.

Versus capital promises today

The Treasury red book for this week’s Budget makes no mention of this money. Instead, it makes a set of specific commitments on capital spending, starting with £1.5 billion for surgical hubs and diagnostic scanners, plus more beds in emergency departments, and support to shift care into the community.

There’s also £1 billion to tackle “dangerous” reinforced autoclaved aerated concrete in hospitals and to “make inroads into the existing backlog of critical maintenance repairs and upgrades across the NHS estate” (which now stands at a staggering £11.6 billion).

And there’s £2 billion for NHS technology and digital “to run essential services and drive NHS productivity improvements, to free up staff time, ensure all trusts have electronic patient records, improve cyber security and enhance patient access through the NHS App.” Plus: upgrades to 200 GP surgeries; a reboot of the New Hospital Programme; better pandemic preparedness; new mental health crisis centres; and investment in R&D.

More detail needed on med tech and digital

Adding the £1.5 billion for hubs, scanners and capacity improvements to the £2 billion for technology and digital in this year’s Budget generates a figure close to Hunt’s promised £3.4 billion for technology back in March.

However, it’s unclear how much of the £1.5 billion will go on buildings and beds and how much on equipment, and it’s unclear if the new government has the same priorities for digital as the old one; on the face of it, the Conservatives’ interest in automation and data platforms has been watered down.

It’s also unclear how investment in technology and digital will be linked to improvements in productivity. Hunt claimed his £3.4 billion for technology would unlock £35 billion of productivity improvements. The detail was supposed to be published in a report this summer that never appeared.

But this week’s red book says technology and digital will make a contribution to the requirement for the NHS to make 2% efficiency savings in line with other departments (which is, of course, more or less the same figure).

As various industry experts interviewed by Highland Marketing pointed out, a lot more detail is needed on what the government plans in this area. And it would be nice if spending could be set out transparently and ringfenced, given that in-year capital to revenue transfers are continuing.

Broadly positive, will it last?

Reeves’ Budget received a broadly positive reaction from the big financial think-tanks. However, the Institute for Fiscal Studies pointed out that if it doesn’t raise growth as she hopes, she will need to raise taxes further to fund her public sector and infrastructure ambitions (The Guardian).

For that to be palatable to the public, there will need to be visible improvements in the NHS, which means there will need to be clarity about how the service is being funded and how that funding is being put to work. It’s not just the health and med tech industries that will be hoping for more transparency and more detail when the 10 Year Health Plan comes out in January.