Health Policy March 13, 2020
Budget 2020: Key takeaways for healthcare spending

By David Duffy - Accountable Care Journal

Only two weeks after his appointment, new Chancellor Rishi Sunak MP had plenty of ground to cover in his first budget. Here are some of the key takeaways for the health and care sector.

With the Bank of England cutting interest rates on Wednesday, the new Government, with its very new Chancellor, has become emboldened to loosen the purse strings. While a huge portion of the spending is geared towards helping the country deal with the coronavirus outbreak, the chancellor is looking to capitalise on “historically-low interest rates” for wider healthcare spending.


Coronavirus COVID-19

Unsurprisingly, financial support for combating the impact of the coronavirus outbreak dominated much of the budget. Mr Sunak stated that the NHS will get “whatever it needs, whatever the cost”.

Key budget takeaways: 

  1. A £30 billion funding package to support UK economy through the outbreak 
  2. A £5 billion boost in emergency response funding to support NHS through the outbreak
  3. £40 million of new funding for the National Institute for Health Research and the Department of Health and Social Care to enable further research into COVID-19 
  4. Statutory Sick Pay (SSP) will now be available for eligible individuals diagnosed with COVID-19 or those who are unable to work because they are self-isolating 
  5. £500 million Hardship Fund so local authorities can support economically vulnerable people and household.

The Chancellor’s pledge of £5 billion investment to support public services in tackling the virus, with the promise of more if needed, is good news. “We do not yet know how great the impact will be, but the service is bracing itself for a significant shock,” said Nial Dickson Chief Executive of NHS Confederation.

The new chancellor has fended off some criticisms from his own backbenches about the level of spending he has put forward to deal with the outbreak. Former Prime Minister Theresa May warned against a ‘short-terminist approach to spending, urging the Government to exercise “restraint and caution”.

Mr Sunak has said that he makes “no apologies” for this budget and that it was “the right thing to do” to help tackle coronavirus. While describing the budget as a whole as an “admission of failure” Labour Leader Jeremy Corbyn did welcome the Governments steps to mitigate the economic impact of the virus.

The unique context of a global pandemic certainly makes this budget harder to judge than others in recent memory. Will the fiscal package designed to prop up the economy through the worst of the disruption be effective? Without knowing just how bad this virus will get it is incredibly difficult to say.


Pensions

The chancellor unveiled plans to increase the annual allowance taper threshold on pensions to £200,000 which will prevent many NHS staff from incurring large tax charges. These changes will come into effect from April 6. The announcement will come as welcome relief to many working on the NHS front line and has been welcomed by health sector leaders.

Under current rules, staff earning more than £110,000 a year will see their tax-free allowance on pensions contributions shrink from £40,000 to £10,000. The changes mean that, from 2020-21, anyone earning less than £200,000 will not incur tax charges from the tapered allowance.

Chris Hopson, Chief Executive of NHS Providers said: “We are pleased the government has listened to the NHS’ serious concerns around pension tax and taken action. It is particularly good to see that the change benefits senior leaders and non-clinicians.

“We also recognise that this is a significant investment – £2.1 billion over 5 years. We understand this comes at a time when there are a number of other urgent priorities for investment. ”


Capital funding

The new budget also outlines several spending pledges on capital funding for healthcare. According to the budget documents, the Department of Health and Social Care’s capital spending budget will increase by £683 million in 2020-21. This will be aimed at helping trusts to invest in estate refurbishments and building maintenance.

This additional funding includes £100 million which will be spent in 2020-21 to begin work on the 40 new hospitals promised by Prime Minister Boris Johnson during last years election campaign.

Is it enough?

Given the trajectory of NHS infrastructure investment over the past decade, any boost in capital spending is likely to be welcomed. This Government has made several promises to boost capital investment in the NHS, most notably with the election pledge to build 40 new hospitals.

That the Government is starting to back up their ambitious pledges with some cash is clearly good news. However, to truly rejuvenate the ageing NHS estate, this funding boost must form the start of a long-term, multi-faceted approach to capital spending in healthcare.

Backlog maintenance, which has had sharp increases in the past decade as trusts continue to divert funding streams to prop up revenue, currently stands at over £6 billion. A recent report from the Health Foundation found that short-termism in capital funding has led trusts to abandoning major infrastructure projects. Repairing, repurposing and optimising the current estate should form the basis of the NHS capital strategy. The need for flexibility has only been amplified by the current coronavirus outbreak. While the additional funding is a start, it is far from clear whether this is truly the beginning of a long-term effort to rejuvenate the ageing NHS estate.


Social care

A £1 billion funding boost for social care was also announced for the next year, as was detailed in the 2019 budget. This year’s budget confirms this additional funding will continue every year of the current Parliament but does not detail any further funding.

To many, this announcement will constitute a missed opportunity. “The failure to announce any real action to overhaul social care is the elephant in the room,” said Nuffield Trust Chief Economist Professor John Appleby.

Professor Appleby continued to say that the sector is reliant on “threadbare” services to keep thousands of vulnerable patients out of hospital and yet we still will not give them the funding and reform they have desperately needed for years. “Coronavirus may serve as a reminder that inaction has consequences,” he concluded.

Workforce issues continue to cripple the social care sector, an issue only amplified by Brexit related restrictions on foreign workers. Additionally, the sector is in dire need of modernisation. Unfortunately, it seems that without a  social care green paper, substantive solutions will be few and far between. Based on recent noises from the Department of Health and Social Care, we shouldn’t be expecting that paper anytime soon.


#ACJInsight #davidduffy