A year into the Coalition’s term and the NHS is already starting to wobble. Its performance against key measures like waiting times has fallen and in April the King’s Fund warned that the service is unlikely to meet its 2011-12 productivity targets. The speed at which the NHS performance has plummeted is all the more surprising given that its budgets are supposed to be ring-fenced. The Guardian’s Sarah Boseley calls it “The great NHS funding mystery.”
As she says, adding an expensive and disruptive re-organisation to the other challenges faced by the NHS doesn’t help but the underlying cause of the problem is that NHS costs are running well ahead of inflation. The demographic pressures that we have known about for years are starting to take effect.
But how can a solemn undertaking to give the NHS more money translate into delays and cuts? The answer lies, in part, in the growing numbers of us who, like Bill, have every expectation of living long into retirement and every hope that the NHS will sort out our infirmities. Average life expectancy in the UK rose from 71 in 1960 to over 80 in 2009. Demographic change is adding £1bn a year to NHS costs, the influential health thinktank the King’s Fund says.
The same pressures will, to an extent, increase the cost of all public services and the level of spending on welfare too.
The challenge we face is stark. If the government left the public services as they were in 2009 and gave them an inflation linked increase every year, eventually they would collapse. Their underlying costs are increasing faster than inflation, meaning that 2009 spending levels will not buy the same standard of public services by 2019. Having studied these trends, politically non-aligned organisations like the 2020 Public Services Trust, the National Institute of Economic and Social Research and the Institute for Fiscal Studies (in its Green Budget) have reached similar conclusions. Governments will either have to increase taxes, borrow more or cut the cost of public services. Both NIESR and the IFS warn that, by the early part of the next decade, there will need to be more cuts, on top of those already proposed by the government.
The political agendas of both parties have caused the UK’s fiscal problems and the necessity for public sector reform to become conflated. They are linked, of course. The UK’s public debt and low levels of growth will leave future governments with even less room to manoeuvre. However, it was always going to be necessary to reduce the cost of public services at some point. That would have been the case even if we had not had a severe recession.
The rapid drop in NHS perfromance over the past year offers a glimpse of the future. Even with a funding increase roughly in line with inflation, it is struggling to cope. All public services face a similar challenge. By the end of this decade we won’t be able to the public services we have been used to for the amount we have been used to spending on them. Something has got to give and, as ever-increasing debt is unsustainable and the British don’t like high taxes, that something will be public service budgets.