Future of the NHS: Health officials out of ideas and remarkably complacent, PAC finds

Government's NHS ambitions run counter to officials' lack of ideas or drive to change. In a report published today, and in the context of a worsening financial position for the NHS, the Public Accounts Committee warns that, while Government's forthcoming 10-year plan will be essential to the health service's recovery, senior health officials seem to be unambitious when it comes to taking the radical steps to begin to implement it.

The Government has laid out its planned ‘three big shifts': from hospital-based to community care; from analogue to digital; and from treating ill health to prevention. However, in questioning both the Department for Health and Social Care (DHSC) and NHS England (NHSE), the PAC found that officials do not seem ready to prioritise these shifts – agreeing with the Government's aims, but arguing they are difficult and should take place only slowly, over the long-term, and not at the expense of patients now.

This risks letting slip a golden opportunity to take significant decisions for the longer-term benefit of the nation's health, at precisely the moment where ideas to meet the level of change required would be highly desirable. The PAC's report calls for the development of the 10-year plan to ensure enough funding is allocated to future-proofing the NHS, particularly on prevention, community healthcare, and digital technology.

The report makes specific recommendations in each of these three areas:

• On community healthcare, the report finds that the long-held ambition to move more care from hospitals has stalled. It recommends that NHSE ensure that more funding, year on year, is spent in the community, in line with its own ambitions.
• On prevention, it is likely that refocusing from treating sickness to prevention will require a similar shift of funds in the same direction. The PAC recommends that a definition be reached for what counts as prevention spending; that officials set out the funding increases required to achieve it; and for local systems to be given the required flexibility and autonomy to direct funds to the right areas.
• On the switch to digital, the PAC's report warns of glacially slow progress in parts of the NHS. A number of trusts still work with fax machines, and NHS providers are often still too reliant on paper records. The report calls for plans to reduce this reliance on paper within 18 months, and a specific deadline to end the use of fax.

The report further notes unconvincingly optimistic assumptions underpinning current plans of annual productivity gains* of 2% by 2028-29, calls on Government to give local health bodies earlier certainty about how much money they will have, and highlights perverse incentives around vaccination funding for GP surgeries which could be seeing more deprived areas losing out.

Sir Geoffrey Clifton-Brown MP, Chair of the Committee, said: “The current Government has told the public that the NHS is broken. This will not come as news to NHS patients, nor to its hard-working staff across the country. Nor indeed does it to this Committee, which has long warned of the systemic issues plaguing the NHS, issues which the Government has transformative ambitions to address. We were aghast, then, to find amongst senior officials in charge of delivering these ambitions some of the worst complacency displayed to the PAC in my time serving on it.

“The evidence given to our inquiry exposes the perennial weaknesses with which those scrutinising this country's health systems are now very familiar. We therefore have a simple message for those senior officials responsible for delivery. Truly fresh ideas and radical energy must be generated to meet the scale of what is required - on community healthcare, on prevention, on digital transformation. Given the position of the NHS, forcing this Committee to wade through treacle by mouthing the same stale platitudes of incremental change is simply not going to cut it.”

PAC report conclusions and recommendations

Integrated Care Boards' capacity to carry out thorough and timely financial planning is severely hampered by delays in NHSE issuing planning instructions and approving final budgets.  To budget effectively, ICBs need early sight of guidance and certainty about how much money they will have.  In 2022-23 and 2023-24, NHSE did not approve ICBs' financial plans until June and May respectively, months after the financial year had begun. For 2024-25, planning guidance about how much funding would be available to ICBs was not released by NHSE until a week before the start of the financial year, due to delays in agreeing priorities and a final budget with DHSC and wider government. NHS bodies and local authorities must work together to deliver a joint strategy, but it is difficult to see how this can be done effectively when local authorities receive their finance settlements by February and their local NHS colleagues' budgets are approved so much later. This Committee has previously expressed concern about late local authority settlements limiting time to plan, but the timetable for their NHS colleagues is even worse. DHSC and NHSE justify slippages in issuing guidance and approving budgets with reference to the amounts of funding involved and external factors, such as high inflation. However, we are not persuaded these are sufficient reason for disregarding fundamental principles of meaningful and timely financial planning.

Recommendation 1. DHSC, NHSE and HMT should publicly commit to issue guidance and meaningful indicative budgets to systems no later than Christmas in future, and NHSE should approve ICB final budgets at least a month before the start of each financial year.

Despite having last published a plan in January 2019, and the major disruption caused by Covid to the NHS since, DHSC and NHSE are yet to recognise the scale of transformation needed to make the NHS financially sustainable. The Government's desire to publish a new 10-year plan is a golden opportunity to take significant decisions for the longer-term benefit of the nation's health and the sustainability of the NHS. Yet there seems a lack of readiness amongst senior health officials to take the radical steps needed. DHSC's and NHSE's approach to NHS finances is typified by short-termism. NHSE needed £4.5 billion in extra funding from the government in 2023-24 to deal with issues such as staff pay and industrial action. DHSC has continued to prop up day-to-day spending by raiding precious capital budgets, reallocating £0.9 billion in 2023-24. We welcome the fact that new HM Treasury rules mean it will no longer be able to do this in future. There is a confidence among the NHS's senior leadership that in the event of a significant challenge, such as another pandemic, government would provide all the extra funding the NHS needed. It appears that no one at the top of DHSC and NHSE has been preparing the NHS for the future for example by putting together a revised strategy or plans as part of the recovery following the pandemic when it was clear that the Long Term Plan 2019 was no longer valid. The Government's aims to shift towards prevention, community and digital are not new, with previous plans and strategies having similar objectives but often failing to deliver as intended. Officials acknowledged that these changes are difficult and should take place only slowly, over the long term, and not at the expense of patients now. Even as they write the new 10-year plan for the NHS, DHSC and NHSE have not convinced us that they are ready to give the three big shifts desired by government the priority they need. This left the impression that there was no real urgent motivation and readiness to drive the change in the NHS that is needed. The DHSC and NHSE have become addicted to moving money from capital to revenue to cover day-to-day pressures. It is welcome that this behaviour will no longer be possible in future, thanks to a change in Treasury regulations.

Recommendation 2.  

1. a) As they develop the ten-year plan, DHSC and NHSE must take a more planned and disciplined approach to ensuring that enough funding is allocated to those activities that can make the NHS fit for the future, particularly preventing ill health, community healthcare, and digital technology. They should measure, track and report what they spend in these areas, and what they are achieving, so Parliament and the public can assess progress over time, and should take actions to strengthen longer-term strategic financial planning.
2. b) The Department and NHS England should not look for loopholes to get round the new regulations and instead should prepare for how it will manage its finances properly without access to the safety valve of moving money from capital to revenue.

NHSE displays a remarkable complacency about the realisation of future NHS productivity improvements, which, if achieved, would be unprecedented. According to official ONS measures, long-term productivity gains in the NHS averaged 0.6% a year over the period 1996-97 to 2018-19. But productivity subsequently fell and has yet to recover fully. The NHS has 19% more staff compared to before the pandemic but is only seeing 14% more patients. Workforce issues such as sickness and absence continue to impact productivity. NHSE is confident that the annual productivity gains that it has committed to of 2.0% by 2028-29 can be achieved because it contends the last two years have been affected by ongoing disruptions such as industrial action, and that further recovery is still possible, particularly through technology-enabled change. However, NHSE was unable to convince us that it has a detailed plan to achieve the promised productivity gains, and it does not yet fully measure and capture productivity in important areas, such as mental health and community services.

Recommendation 3. NHSE should set out in detail which specific actions and initiatives it expects to contribute to the unprecedented increase in productivity it has committed to, and by how much. This should include specific measures to address poor staff retention and sickness rates, which contribute to low productivity.

In some cases, NHSE's payment mechanisms can mean that local systems do not receive financial recognition when they prioritise hard-to-reach patients. GP surgeries receive a payment for every child vaccination. This vaccination funding mechanism favours areas where parents are more willing to inoculate their children, while areas with higher levels of vaccine hesitancy, which may be more deprived areas, receive less funding and therefore have fewer resources to carry out much-needed activities such as outreach and education, potentially leading to even fewer patients being vaccinated in those areas. NHS Providers notes that tackling wider determinants of health must involve the specific targeting of poor health in the most deprived areas.

Recommendation 4. NHSE should review current payment systems and processes to ensure they incentivise local systems to work with those most in need of help.

Given the constraints on public spending, it is highly likely that re-focusing attention from sickness to prevention cannot be achieved without re-allocating existing NHS funds in the same direction. Senior ICB leaders report a continued lack of progress with the government's long-standing aim to move towards preventing ill health rather than treating it. Furthermore, the public health grant used by local authorities to commission preventative measures such as health-visiting and drug and alcohol services is expected to fall in value by £193 million (5%) over the period 2022-23 to 2024-25 (at 2022-23 prices), despite government's commitment in 2021 to maintain it in real terms. However, DHSC does not view providing more resources for prevention as a substantive part of the solution. Instead, it considers that a shift towards prevention might be achieved through longer-term legislative and culture change to tackle issues such as obesity, physical activity and poor air quality alongside a shift in the way GPs advise patients. Both DHSC and NHSE see the 10-year health plan as an opportunity to crystallise their prevention ambitions, but the lack of a precise definition of what even counts as prevention spending will make assessing progress against this vital policy aim impossible. Local areas would value more flexibility about where they can direct their resources to achieve greatest impact, including how they fund measures to prevent ill health. 

Recommendation 5.

1. a) DHSC, NHSE and HMT should define what counts as health prevention spending for the whole of government within the next six months, and track that spending annually, using 2024-25 as a baseline year.
2. b) DHSC and NHSE should set out the funding increases required for prevention and give local systems the flexibility and autonomy they need to direct this funding where it can have the greatest impact.

NHSE's long-held ambition to move more care from hospitals to the community has stalled. There would have been more investment and progress in mental health and community services, particularly GP surgeries and dental services, in 2023-24 had NHSE not redirected funding to prop up the day-to-day spending of local NHS systems. Despite carrying out 15% more elective activity compared to before the pandemic, the NHS is less productive overall once the activities of mental health trusts, community trusts and GPs are considered. NHSE makes trade-offs between spending that will yield benefits in the longer term and spending to meet current priorities, and it acknowledges funding increases for mental health and community services are slow. NHSE recognises there is value in considering whether best use is currently being made of funding for Continuing Healthcare assessments and the Better Care Fund, intended to support joint working between the NHS and social care.

Recommendation 6.   NHSE should ensure that, year on year, a greater proportion of its funding is spent in the community, in line with its own policy ambition. Any review of Continuing Healthcare funding and the Better Care Fund, DHSC and NHSE should not make changes that will see these community-based funds redirected to hospitals.

Despite ambitions to improve productivity through the introduction of new technologies, the switch to digital in parts of the NHS has been glacially slow. Digital and technological improvements could have a transformative effect on the NHS. However, NHSE's investment in technology over the period 2022-23 to 2024-25 stalled because funding was redirected to mitigate ICBs' spending deficits. For example, a number of NHS trusts continue to rely on outdated IT equipment such as fax machines.  The NHS currently lacks a consistent data infrastructure across its entirety and NHS providers vary in terms of technological maturity. NHS providers are often still too reliant on paper records but NHSE says it has a programme to address this over the next 18 months. NHS providers that have implemented electronic patient records have productivity levels that are 13% higher than those without them.

Recommendation 7. Alongside its Treasury Minute response, NHSE should write back to the committee setting out its plans to reduce the reliance of NHS providers on paper within 18 months, including key milestones, and the proportion of NHS institutions it expects to be paperless at each milestone. A specific deadline should be set to end the use of fax machines within the NHS.