Editorial Wednesday 22 November 2017: A Budget to short-change the NHS

Budget Day rolls around fast: this year, the cacophony of requests for more funding for the NHS has been almost incessant.

In my HSJ column, I assumed that the NHS is not going to get the £4 billion a year it needs to keep things stable as they are. (This doesn't include a staff pay rise, not getting waiting times back on track.)

UPDATE: the now-published Budget speech promised "additional resource funding of £2.8 billion to NHS in England, broken down as:
£350 million immediately for this winter
£1.6 billion in 2018-19; and
The rest in 2020.

"Mr Hammond stated this gives the NHS next year an £3.7 billion in total."

The NHS needs an extra £4 billion a year to stand still. Mr Hammond seems to have offered it less than half of this sum.

The funding is also 'additional' - outside the spending review process, and therefore non-recurrent. I therefore resile from nothing in this piece.

The BBC's well-informed Laura Kuenssberg has just tweeted that "There will be additional cash for the NHS but less than the 4 billion the NHS boss has callled for".

There are a few must-read pieces to put the budget in context: the great Nick Timmins' op-ed yesterday for The Times sets the political context out clearly.

Sally Gainsbury's deft but deadly analogy of the NHS underfund with the household budget is both amusing and amazing. We can easily forget the scale of the public policy screw-up the Government is certainly in the process of making.

And Lawrence Dunhill has a good primer in HSJ on where to spot the Treasury Munchkins' efforts to do sleight of hand.

The point of the Budget
The real issue here is not about decisions on NHS funding the Chancellor takes today: it is abundantly clear he will have to un-take them in around six months' time. Tick-tock, tick-tock.

The NHS will not collapse tomorrow. That is not how it works. There is a great deal of ruin in a health service, just as economist Adam Smith noted there is in a nation.

Further gradual deterioration is certain, however. You and I will notice it.

The real point is that the NHS is going to have to make some extraordinarily uncomfortable decisions about what it is not going to do as a consequence of the Chancellor's choice.

The latest NHS Improvement figures show that the provider sector is already significantly financially off-course. This will get worse as winter hits.

So on current trajectory, the NHS is going to breach the Departmental Expenditure Limit, which causes economic chaos. Official forecasts for government borrowing have to be re-made. It could affect the country's credit rating, and we are still borrowing A Lot Of Money.

So the political likelihood is that will have to be avoided at all costs.

That leaves one choice on the table. Significant cuts to commissioning budgets.

Yes, of course where we put the deficits is Jesuitical economics. I wrote about where we put deficits here, in a piece that has held up pretty well.

GooRoo waiting dynamics expert Rob Findlay observed that perhaps in the interest of full transparency, "the waiting list should be considered in the financial accounts, as a liability to CCGs and an asset to providers. That would show who was really in the red."

Nobody's fool, Mr Findlay.

If there is no £4bn recurrent coming in the 18-19 baseline, then Nigella’s Messy Financial Fudge will not work for 17-18 to keep the NHS within the DEL, for all the accounting tricks in China.

Land sales, as proposed in the Naylor Review, will not cover the shortfall. This is because it's one-off money (you can't sell the same bit of land twice).

More to the point, not very much of there land is in areas that have obvious appeal to property developers. (Oh, and Brexit's likely to cost us about 8% of the UK construction workforce. Which throws another inflationary  spanner in the works.)

A lot of the NHS surplus land is things like single units on business parks and industrial estates. Change of use permission may not be easy to obtain.

And it's odd for the Conservative Party - free market champions - to not realise what when you massively increase supply of not-clearly-redevelopment-friendly land for sale pretty much all at the same time, you're going to see an effect of demand - and of course on price.

It also means that the NHS will be competing with itself to sell what is mostly relatively low-value land. You would think that the party of the market would know that the result will be downward pressure on the price such land can command.

So if the NHS is not to breach the DEL this year (which causes government economic forecasts to be rewritten, and could affect the UK's credit rating), expect big cuts to 17-18 commissioning budgets to net off provider overspends.

That is the one available tool. It will be used.

This is going to get so messy, we might as well call it Lionel.