UK Treasury asks health department to separate funding requests

The UK Treasury has told the health department to separate requests for regular funding from emergency support for fighting Covid-19 as the cost of fighting the pandemic puts the NHS’s budget under increasing pressure.

The request came as the NHS struggles to cope with the aftermath of coronavirus while delivering a long-term plan to improve treatment of killer diseases, and meeting a raft of general election manifesto commitments.

But with waiting lists predicted to hit up to 10m by the end of the year, the health service is dealing with a backlog caused by treatment postponed at the height of the pandemic.

Two people familiar with discussions said the annual increase of about 3.4 per cent, protected by law, until 2023-4 risked being insufficient to meet the growing demands being placed on the health service.

One health service figure said the government wanted to use the impending departmental spending review “as a means of effectively restating what the priorities of health and care should be post-Covid”.

A joint health and social care task force has been set up involving officials from 10 Downing Street, the Treasury, the Cabinet Office and the health department. It is aimed at determining what the health service’s goals should be and how much additional money may be needed to fulfil them.

When the NHS received a rare five-year revenue settlement in 2018, the Treasury also signalled that it would soon grant a multiyear capital settlement — now viewed as crucial to delivering the prime minister’s pledge to build 40 new hospitals — and additional money for education and training as it seeks to increase nurse numbers by 50,000. Neither has yet to materialise.

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The idea of the task force is to “get away from the quite siloed spending round in Whitehall . . . to work out where the NHS is going to need its money”, according to one insider. Simon Stevens, NHS chief executive, is not a member of the task force, but other senior executives from NHS England are involved.

Questions remain, however, about the precise shape of the coming spending review. On Wednesday, officials announced that chancellor Rishi Sunak had cancelled plans for an autumn Budget given the continued fiscal uncertainty.

Now the Treasury is considering whether to also cancel its original plan for a medium-term spending review for the same reason. 

With coronavirus cases again rising fast and economic uncertainty rife, there is no guarantee there would be a full spending review this year, and the Treasury has not yet decided whether the uncertainty is so great it should have another stopgap single-year spending round towards the end of November.

Officially, however, the Treasury is still telling departments that the spending review is on track to deliver three-year budgets for day-to-day spending and four-year capital spending allocations later in the autumn. 

One possible compromise is for the Treasury to set out one year of day-to-day spending and four years of capital spending.

“The level of uncertainty and underlying political disagreement about how much we’re increasing spending means the economics and politics both point to a one-year settlement,” said Torsten Bell, director of the Resolution Foundation, a think-tank. “I can’t see any way that we are getting a three-year spending review.”

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Senior Treasury officials say that Mr Sunak’s letter to spending departments from July still stands and would prioritise stronger economic growth, levelling up the UK’s nations and regions, and making the UK “a scientific superpower”. 

The sting in the tail of the chancellor’s spending review, however, is that the public finance pressures from coronavirus have already forced him to cut the generosity of the package. 

In the Budget, he set indicative spending plans that suggested that underlying public spending would increase by 9 per cent in real terms between 2019-20 and 2023-24, but this was changed to a commitment only to increase spending in real terms over the same period. 

Severe public finance pressures suggest that capital and current spending plans are likely to be scaled back, with allies of the chancellor saying that all budgets are “under a lot of pressure”, although there is no likelihood of the austerity and real-terms cuts of the past decade. 

Departments handed in their submissions for future funding by a deadline of last Thursday amid expectations of a tough period of negotiation with Stephen Barclay, the chief secretary to the Treasury.

Ministers have been ordered to make “tough choices” in all non-coronavirus areas of spending by identifying ways to deliver savings and shift spending towards priority areas.



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