The NHS is the 'big winner' from Reeves' spending review – but there will be 'difficult trade-offs'

The NHS received a big budget boost in the spending review – but the cash injection will mean painful cuts to other public services.

Day-to-day spending on the free at point of use health service will increase by £29 billion per year until the end of this parliament, chancellor Rachel Reeves has pledged.

That’s a 2.8% uptick for the Department for Health and Social Care, with the additional 0.02% made up by increases to other NHS funding sources. It’s much higher the average rate 2.3% awarded across other departments, and will “protect and renew” the NHS, Reeves told MPs.

“That is what the British people voted for and that is what we will deliver. More appointments. More doctors. More scanners,” she said.

But with health accounting for around four-tenths of the government’s overall day-to-day spend, this could mean painful compromises for departments such as the Home Office and Department for Transport.

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“The NHS is in many ways a ‘big winner’” said Sebastian Rees, head of health at the Institute for Public Policy Research (IPPR).

“From a day-to-day spending perspective, the NHS is the big winner out of this spending review,” he told Big Issue. “A lot of that money is going to be dedicated to increasing pay for staff, which is welcome, and closing some of the kind of big deficits you see across the system already.”

But it is “always a tricky trade-off”, he added: that uptick will “have a really big knock-on effect for other government departments”.

This could backfire, as many of the departments that will lose money are key for preventative healthcare.

“The most obvious example would be, if you are really constraining the spending available to local government to provide things like leisure services, social care for children and adults, and public health services, while at the same time increasing the NHS budget, there’s a bit of a false economy there,” Rees added.

The new NHS funding will long-term “narrow health inequalities and improve the health of the workforce”, said Jake Shepherd, senior researcher at Social Market Foundation.

“But this comes with some tough trade-offs, with cuts to disability and health-related benefits which risk leaving vulnerable people worse off and undermining health goals,” he added.

Before the spending review, Institute for Fiscal Studies director Paul Johnson calculated that an annual 2.5% increase to NHS funding would mean no increases elsewhere.

“If the Department for Health and Social Care gets an annual increase of that amount, then after accounting for the extra cash promised to defence, there will be nothing left to increase the budgets of other departments. 2.5% for health means zero, on average, for everything else.”

With an increase of 3%, cuts elsewhere are baked in.

How much money does the NHS need?

There is no doubt that the NHS is in desperate need of funding.

The 2010s were the most austere decade since the NHS was founded, according to the independent Lord Darzi report published last year. Spending grew at around 1% in real terms per year, against a long-term average of 3.6%.

The result: a health service in crisis. Between 2010 and February 2020, the elective waiting list doubled from 2.3 million to around 4.6 million.

Before last year’s election, the government pledged to increase funding for the health service. It has staked its reputation on several key goals: chiefly, hitting a routine operations target of treating 92% of patients within 18 weeks, a goal that has not been met for a decade.

Currently the NHS is treating only 60% of routine conditions within this 18-week time frame.

Today’s spending review funding increase will help tackle this issue by funding more staff.

But these staff will still need more equipment – something the spending review does not make sufficient provision for, said Rees.  

The vast majority of UK health spending – between 94% and 96%, depending on the year – is classified as ‘resource’, or day-to-day spending.

But capital spending – the money allocated for building and buying new stuff – has “basically flatlined”, Rees explained.

The government has promised a £2.3bn real terms increase from 2023-24 to 2029-30 to invest in the NHS, including in new technology, hospitals and primary care.

“But a lot of that money was money that money was money that was already announced,” Rees said.

Capital spending in the UK has trailed the OECD average since 1995 – particularly in healthcare.

“Going forward, what it looks like is that money allocated to capital is going to stay flat in real terms. And given the big problems that the NHS has in terms of increasing its productivity, and what we know about what might help improve its productivity, which is really investment in equipment, kits, hardware for it. I think there are some big questions about whether the kind of balance between day to day spending and capital is being got right.”

For a better sense of what this balance will look like in practise, we will have to wait until the government publishes its 10 year plan for the NHS later this month.

We “need to ask where this money is actually going”, said Dr Julia Patterson, chief executive of doctor advocacy group EveryDoctor.

“This Labour government has chosen to advance NHS privatisation, and have entered into a deal where private companies will receive billions more in public money to deliver NHS care,” she asked. “How much of the £29bn announced today will end up in private shareholder pockets? If this new government truly wants to rebuild the NHS, they need to support the staff, invest in publicly-owned NHS services, and stop turning the NHS into a cash cow to make private shareholders richer.”

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