Budget backgrounder – ten years of underinvestment impacts the NHS and its deployment of technology

Years of inadequate funding and underinvestment in facilities and technology have left the NHS unable to address the recovery, demand, and financial pressures it is facing. In the first of two analysis pieces ahead of the Autumn Statement 2023, and a likely change of government, we look at how the health service ended up in this position: and what it will take to get it back on track.

There’s a well-known passage in an Ernest Hemingway novel in which one of the characters is asked how they went bankrupt, to which the answer is: “Two ways. Gradually, then suddenly.” And there’s a growing consensus that this is how the NHS ended up in the position it finds itself in now.

Earlier this year, veteran health economist Chris Ham published a report on the “rise and decline” of the NHS in England over the past 20 years. He argued that “multi-year funding increases above the long-term average” and the reforms they paid for “resulted in major improvements to NHS performance between 2000 and 2010.”

Since then, “performance has deteriorated due to much lower funding increases, limited funds for capital investment, and a neglect of workforce planning” plus a failure to invest in public health or put social care on a sustainable basis.  

Last month, the Institute for Government argued that this pattern has been seen across public services. In a performance tracker report, it says eight out of the nine public services that it examined in detail are “performing worse now” than they were in 2019-20, before Covid-19.

The IfG says some of the deterioration is down to the pandemic, but “the depth of problems and the speed of recovery have been worse than they might have been because of the state of public services when the pandemic hit.” It also says the state of public services is down to a persistent lack of funding that can cause ripple effects.

For example, problems in hospitals and the crisis in social care can lead to delayed discharges. Delayed discharges impact wards. They impact ambulance services, “which cannot hand over patients to A&E if the system becomes jammed.” They hit GPs, “who find more of their referrals to hospital are rejected” or delayed. But they also hit patients, who can get stuck in hospital, deteriorate, and “find themselves back at their GP… or A&E, further increasing pressure on hospitals.”

Long term underinvestment in capital damages infrastructure and hits productivity  

The IfG is particularly worried about “historic underinvestment in capital”, which it says has left public services without the facilities and technology they need to drive up productivity. Its report puts this down to two factors. First, the UK is a “low investment nation” that spends just 2.5% of GDP on capital investment in public services, against an OECD average of 3.7%.

Second, Whitehall has a habit of underspending the limited capital budget that is available, because of “optimism bias” over how long projects will take, a lack of administrative and delivery capacity, and clawbacks to cover shortfalls in day-to-day spending.

This will resonate with anyone who has worked in healthcare IT, where successive governments have announced programmes to digitise the NHS, only to see them fail (the National Programme for IT), get curtailed (the global digital exemplar programme), or be delayed (Frontline Digitisation).

The consequence, as the Commons’ health and social care committee reported this summer, is that the NHS has “a lack of infrastructure”, a lot of legacy systems, and a problem with interoperability. The British Medical Association has pointed out that this wastes a lot of time.

A survey for the doctors’ union found members can spend as much as half an hour logging into computers and finding the many systems that they need to treat a single patient. If there is a computer available. Almost half of respondents struggled to access the equipment they need to do their jobs, and a third said their software was “rarely or not at all” adequate.

To put this another way, as the public accounts committee did in another report, one of the reasons the health service is struggling to deliver NHS England’s plan to recover emergency and urgent care services, when headline spending and staff numbers “are higher than ever before,” is that it lacks the facilities and technology required to drive up productivity.

Specifically, the PAC complained, a significant minority of trusts lack electronic patient records and just four have the “first class” electronic bed management systems that might improve patient flow and start to address the NHS side of the problem of delayed discharges.

Short term spending challenges curb innovation

If this has been how the NHS has “gradually” ended up in a bad place, then it could “suddenly” find itself in crisis this winter. The last two Budgets have set-out real-terms funding increases for the NHS, but these have been well-below the historical trend.

In addition, the Department of Health and Social Care signed up for heroic assumptions about the efficiency savings that trusts will be able to make, and productivity increases they will be able to deliver (NHS England estimates that clearing the waiting list will require hospitals to operate at 130% of pre-Covid activity).

Meanwhile, there has been little or nothing for public health, and councils have been told to raise their own precepts for social care. Think-tanks have been warning that the future looks tight, and now inflation has taken off and the NHS has been landed with a huge bill for strikes that the government has been reluctant to settle.

This short-termism has had its own impact on IT. In his October 2021 Budget, then-chancellor Sunak made headlines by announcing £2.6 billion for “innovative digital technology.” However, some at least of this money has been diverted to day-to-day pressures, and most of what’s left has been earmarked for Frontline Digitisation.

Despite this, the Infrastructure and Projects Authority has concluded the programme to finally deploy electronic patient records to every trust will not hit its target of March 2025 and the deadline has been pushed back to March 2026.

Meanwhile, it looks as if the DHSC and NHS England have decided not to send IT funds down to integrated care systems and trusts, but to consolidate it into pots for national priorities, such as virtual wards, or portals, or – recently – AI.

The Highland Marketing advisory board has noted that this “digital hokey cokey” is an inefficient way to drive innovation, as organisations that may have other priorities may need to spend resources on bidding for funds that can abruptly vanish, or get rebadged, or issued so late they can’t be spent.

Prescription for the future: stable strategy, funding, workforce plans and tech  

There is a growing consensus on how the NHS has ended up facing one financial crisis after another, while slipping further behind on recovery, and failing to keep up with the demand for urgent and emergency care, there is also widescale agreement on what would turn things around.

Chris Ham, who worked through the New Labour years, says the government needs to learn the lessons of the 2002 Wanless Review, which set out three scenarios for healthcare spending up to the end of the last financial year.

In the least expensive, health status improved through a combination of public health policies and public engagement, while the health service became more responsive and efficient by taking up the latest technology.

In the most expensive, which is pretty much where the UK is now, the opposite was the case. So, Ham argues, the government needs to use “legislation, taxation and regulation” to get public health back on track, while giving integrated care systems time and space to rebuild services.

Similarly, the IfG report calls for a more stable policy regime for public services, linked to long-term workforce plans, and upfront investment in facilities and technology. However, this is unlikely to happen ahead of the general election that has to happen by January 2025.

So, the IfG notes, “whoever forms the next government” will have to face “the daunting task of returning services to pre-pandemic levels of performance, never mind those seen in 2010.” It will be another long, gradual job, and one in which considerable and rational investment in capital, facilities and technology is going to have a role to play.