ABHI Membership

The NHS at 70: Back to the Future?

Ten years ago, I had just returned home after spending some time living and working in the United States. Whilst there, I had been fascinated by discussions about the emerging Accountable Care Organisations. Place based, integrated health and care systems funded through capitation payments on the populations they served. They struck me, then, as looking very much like a pre-reform NHS.

By pre-reform, I refer to the service before Margaret Thatcher announced on “Panorama” in 1990, that she was personally going to reform the NHS, kicking off a period of almost continual reorganisation since. Over the years, and with both a personal and academic interest in health systems reform, I dined out regularly on the back of delivering detailed, nuanced analysis of the implications of the latest iterations. Now, from a distance, and perhaps with a more mature world view, I would point to three periods, each having a recognisable, overarching theme.


Thatcher’s TV moment, prompted by a falling-out with the medical profession, saw a decade where the theme was structural and functional change. After a period where the NHS had been largely untouched since its inception in 1948, aside from some tinkering with Health Authorities in the 1970s, the Thatcher, and later Major reforms, introduced a veritable alphabet soup of new organisations. FHSAs, DHAs, LHAs, PCGs are all somewhere in the memory banks of those of us who worked with them through that time. The reforms also, of course, introduced, the internal market, attempting to drive up quality and efficiency by creating a quasi-market between those who commissioned and paid for healthcare and those who delivered it. The changing nature of NHS structures at the time reflects the complexities of managing a market, where “market failure,” in its true Economics sense, is almost perfect.


In January 2000, Tony Blair, again through the medium of television, this time live on “Breakfast with Frost,” launched the period of reform I would argue was characterised by investment. If the 1997 New Labour Government honoured its manifesto commitment to abolish the internal market, it did so by replacing it with a real one. The approach is apparent in how that government marshalled the year-on-year, real terms growth it committed to the NHS through the first half of the decade. Investment was accompanied by a raft of targets, the emergence of health technology assessment as a tool to manage the introduction of new technology and a national tariff to support choice and a multiplicity of providers, including those from the private sector. The implications for ABHI Members at that time saw increases in volumes and the development of new services that followed the investment, matched by increasingly sophisticated evidence requirements and a sharper focus on costs.


Notwithstanding the global economic crisis of 2008, it was evident that the level of funding growth the NHS was enjoying was not sustainable, and that from about 2010, we would be entering a period where the overarching theme was to be efficiency and productivity. The NHS legacy of the 2010 coalition government will, doubtless, be the much maligned Lansley reforms which resulted in the 2012 Health and Social Care Act. It is not for me to be an apologist for Lansley, or indeed present a detailed critique here, but his reforms and the Act were necessarily a compromise resulting from the coalition. Abolishing PCTs, for example, was a Lib Dem manifesto commitment. Where the reforms were a setback, was in Lansley’s approach to delivering improved efficiency and productivity. The Act hard wired the market in to the NHS at a time when the service was improving, and those within it recognised that the best way to realise efficiencies was via collaboration and cooperation.


The response was for the newly legislated Arm’s Length Bodies (Lansley took them away from the direct control of the Department of Health) to produce 2014’s NHS Five Year Forward View (5YFV). 5YFV was designed to implement changes, behavioural, functional and structural, that would address a projected £30 billion funding gap between the NHS budget and demand for its services by 2020. This would be produced by a blend of reducing demand, improving efficiency and increasing real-terms funding. Central to 5YFV was the concept of New Models of Care and the creation of 50 so-called “Vanguards” in five new areas. The common theme across each of the areas was increasing collaboration and the integration of services.

5YFV remains the key policy driver for the NHS, even if it has not fully realised the extent of its ambitions. Speaking at the launch of last year’s “Next Steps on the 5YFV,” Health Secretary Jeremy Hunt acknowledged that the capital investment asked for in 5YFV has not been forthcoming and the demands on the NHS had been far greater than was envisaged in 2014. Delivery had also been hampered by too much fragmentation in the oversight and support offered by various national bodies. The service was challenged by needing to juggle multiple priorities.

In 2016, at a private dinner with the NHS Head of Strategy and a delegation of ABHI’s Board, I again heard talk of Accountable Care Organisations. It was to be our first sight of the 44 Sustainability and Transformation Partnerships (STPs) that would complete the 5YFV journey, and, ultimately, replace the internal market with an integrated care model. As time has moved on, various models have developed to deliver this, and the lead footprints, largely STPs, have become known as Integrated Care Systems (ICSs).

This brings us to the recent announcement that NHS England and NHS Improvement will begin to work more closely together to provide single system leadership. The 2012 Act prevents the two organisations from actually merging without further legislation, but they are going as far as they possibly can. They will establish a new Executive Group, co-chaired by the CEOs of the two organisations and comprising the membership of all national and regional directors of each organisation. A new “NHS Assembly” (working title) will be established to create better engagement with the wider NHS, review progress on 5YFV and co-design the forthcoming NHS 10 year plan, announced by the Prime Minister in March.

Seven joint regional teams will be established, led by a single Regional Director reporting into both NHSE and NHSI. Regional Directors will have full responsibility for the performance of all NHS organisations within their region, making decisions on how best to assure and support performance. They will also drive strategic visions for the patterns of services and provider configurations. This includes the development of STPs / ICSs, with the centre aiming to devolve more power to local systems as they mature, with support from the regional teams.

 A number of National Director roles will be established reporting to both CEOs:

  • A single NHS Medical Director
  • A single NHS Chief Nurse
  • A single NHS Chief Finance Officer
  • A single national director for transformation and corporate development.

There is, by now, a fairly old joke suggesting that the two things that will survive the nuclear holocaust are cockroaches and Health Authorities. It is hard to describe the regional teams as anything else other than Health Authorities, and they will replace a widely missed layer of regional, whole systems leadership abolished by the Lansley reforms.

Alongside these structural changes, comes the Prime Minister’s commitment for a “long-term funding settlement.” This begs a number of questions. How long is long-term? How much will the service get? Where will the money come from?

Government is not strong on multi-year funding arrangements, finding it hard to move away from an annualised approach for its public services. A 10 year plan might suggest a funding settlement to match, but the closest we might get is commitment over a spending period review, although even then, individual front line services may not be entirely sure of how much, precisely, will come their way from year-to-year. Spending commitments made by one government are also not always necessarily honoured by subsequent ones, and priorities change over time.


Spending on health has been volatile. The average annual real growth rate from the founding of the NHS up to 2016–17 has been 3.7%. During the Thatcher and Major Conservative governments (1978–79 to 1996–97) it was 3.3%, whilst the Blair and Brown Labour governments (1996–97 to 2009–10) saw it rise to 6.0% during my period of “investment.” The period of “efficiency and productivity” heralded by the Coalition government (2009–10 to 2014–15) saw rises of just 1.1%. The recent Cameron and May Conservative governments (2014–15 to 2016–17) have realised 2.3%, but this was heavily front-loaded to support the delivery of the 5YFV. The falloff in spending since 2010 has had a demonstrable effect on the service, with the financial situation of the acute sector deteriorating in recent years, volumes of elective work falling and waiting times, once sacrosanct, beginning to increase again.

There is a degree of unanimity amongst think tanks on the level of spending that is required. An Institute for Fiscal Studies / Health Foundation report says that over 15 years 3.3% would maintain current levels of provision, whilst 4% would be needed for any improvement. 3.9% increases would also be needed for social care. In cash terms this would equate to an additional £95 – 124 billion extra per year by 2033/34. The Institute for Public Policy Reform has updated Lord Darzi’s decade old “High Quality Care for All,” and concludes that an extra £50 billion for health and £10 billion on social care is needed by 2030. These figures would get the NHS back to its long-run funding trajectory. On June 6th, in an open letter to the Prime Minister, Health Secretary and Chancellor, the Chief Executives of the King’s Fund, Health Foundation and the Nuffield Trust argued for 4% real terms growth to include Social Care.


The question then is how we fund any increases to the NHS. What we spend on the NHS is a political choice rather than reflecting any real sense of affordability. That said there us a feeling that any long-term settlement would need to be paid for by tax increases. The NHS is currently funded from general taxation, a so called “Bevridgian” system. Advocates say that this is part of the reason the NHS is considered to be the most equitable healthcare system in the world and it offers to flexibility to divert spending from other areas as necessary. An alternative is to use a hypothecated tax dedicated to the NHS, a “Bismarkian” system, and is the social insurance model used in countries such as Germany. The system is said to be favoured by current public opinion as it explicitly links tax to health spending. The downside is that if you limit your spending in a certain area to a fixed percentage of revenue, you are hostage to the tax take if the economy takes a downturn. Indeed it is accepted that in times of economic difficulty, the demand for health services increases.

The NHS celebrates its birthday on 5th July and the Prime Minister will doubtless want to mark the occasion. My sense is that rather than make significant announcements and funding commitments at this stage, she is likely to appear at a tea party (your local hospital will be holding one) and re-announce the 10 year plan with  a little more detail around the NHS Assembly and a formal review of NHS finances. A budget is expected in the autumn and the Chancellor has indicated that there will be a Spending Review in 2019, with money available the following year. It is reported that the Health Secretary is locked into a debate with Treasury on the level of any increases that might be expected. Treasury has long bemoaned the inability of the NHS to change and sees health spending as a potential black hole. Achieving anything close to the 4% that commentators have made an eloquent case for, may present an insurmountable challenge for the Department of Health and Social Care.

Social Care is also another imponderable. Lack of capability and capacity in the sector is constraining activity in the NHS. Hospitals are overwhelmed by patients presenting to A&E who should not to be there, and are subsequently unable to discharge the same patients back to the system that could not cope with them in the first place. A fully integrated system makes sense but is politically challenging. More chronically underfunded than the NHS, access to social care is means tested allowing people to be charged at the point of delivery. The conflict between the two is seemingly unresolvable and may explain the continued delay in the anticipated Social Care Green Paper, a key piece in the jigsaw. Learning from Accountable Care Organisations in other countries is that that those that do best have invested, first, in social care, not something that seems to be an option for the NHS in England.

Understanding the environment in which you operate is critical for any business, and a solid appreciation of new structures at national, regional and local level will aid business planning. As an organisation we have regular, formalised engagements with existing and emerging health system leaders and will share intelligence with our Members.  ABHI Members should see the benefits of any increase in health spending. In much the same way as an analysis of the landscape and funding levels from 2015 onwards might have suggested that waiting times would move out and elective volumes begin to fall to accommodate perennial winter pressures, any uplift is likely to ease those pressures. The Vanguards have begun to deliver reductions in A&E admissions which, in time, will also ease system pressure in the acute sector. Rolled out at scale and with strong regional support and together with some long term funding certainty, they could begin to give the NHS some space to think beyond its day to day operational woes.

There does seem to be a burgeoning political will to address the many, well-rehearsed challenges facing the NHS, and we will await with interest news of the 10 year plan, NHS Assembly, regional teams and longer term funding arrangements. However these developments are happening at a time of extreme political turbulence and uncertainty, a situation that is not likely to change in the immediate future. There is little or no legislative time in this Parliament for any changes that may be needed to secure the type of service integration required, and securing the necessary funding is far from straightforward.

We will continue to keep our Members appraised.