“Paying for the workforce plan by squeezing capital spending would be a serious mistake.” That is the warning issued as part of the conclusion to a new report from the Institute for Fiscal Studies (IFS), which drills into how much it will cost to fund the NHS Long Term Workforce Plan, assuming that the ambitious targets it sets for increasing the NHS workforce in England are achieved in full.
‘The Implications of the NHS Workforce Plan’ points to a lack of consideration for the full, long-term costs of implementing the plan and says its biggest concern is that other inputs will be neglected.
Key findings of the IFS report
• The workforce plan aims to increase the number of staff employed by the NHS in England from around 1.5 million in 2021-22 to between 2.3 and 2.4 million in 2036-37
• This would mean 49% of public sector workers in England will work for the NHS in 2036-37, and one in 11 of all workers in England will work for the NHS
• The plan included funding for training new staff, but did not consider the much more significant medium-term implications of such a large increase in staffing on the NHS paybill; the IFS estimates the total NHS provider wage bill is likely to grow by between 4% and 4.7% per year
• To achieve the rapid increase in the NHS workforce set out in the plan, it is likely that NHS wages will need to become more generous in real terms, potentially even exceed wage growth in the rest of the economy
• The workforce plan implies annual NHS budget increases of around 3.6% per year in real terms, which is in-line with the long-run average in spending across the years between 1949-50 and 2022-23, but higher than the 2.4% per year seen since 2009-10
• By 2036-37, if the central case is met, spending on the NHS in England is projected to be equivalent to around an extra £50 billion in today’s terms; raising that sort of sum would require increasing the standard rate of VAT from 20% to around 27% by 2036-37 or increasing income tax rates by around six percentage points (or finding an alternative source of funding)
• The NHS itself estimates that the staffing increases detailed in the workforce plan will only be sufficient to meet demand if productivity can be increased by between 1.5% and 2% per year, which is an extremely ambitious target and well above estimates of what has been achieved in the past.
Increasing the workforce so more patients are treated is likely to mean other, non-staffing costs rise, such as energy, food, medicine, IT and maintenance. These inputs have not been considered and in many cases it will come to policy decisions about which to prioritise. In the view of the IFS, this is the main risk associated with a workforce plan, especially one that aims for such a large increase in staffing. It further warns that achieving the funding growth of 3.6% per year that would pay for the additional spending will require difficult fiscal decisions to be made in the current financial climate of poor growth and debt interest, acknowledgement of which it says should be front and centre of fiscal planning this autumn and the next Spending Review (by the end of 2024).
“While the plan acknowledges the importance of other inputs, such as capital and digital infrastructure, it is vital that the NHS and the wider government ensure these inputs receives similar planning and attention. Paying for the workforce plan by squeezing capital spending would be a serious mistake,” the report concludes.
