The future of the NHS: prosperity or austerity?

When asked in 2018 which national institution they were most proud of, the British public awarded the NHS second place – a close runner-up behind the fire brigade. 

The coronavirus pandemic triggered a more vocal outpouring of love for our National Health Service. Images of rainbows and ‘thank you NHS’ signs festooned our windows and streets, while the weekly ‘clap for carers’ saw people across Britain emerge from their locked-down homes and applaud public sector workers. Politicians from across the political spectrum joined in.

More recently, the government announced an above-inflation pay increase for hundreds of thousands of public sector workers, including doctors and teachers. Chancellor Rishi Sunak cited their “vital contribution” during the worst of the pandemic.

Before the severity of Covid-19 was realised, Rishi Sunak announced in his March budget an additional £5 billion in funding for the health service; in September, his predecessor Sajid Javid declared that the government had “turned the page on austerity”. 

“The future could look bright for doctors, nurses and other health staff.”

If the widespread adoration for the NHS continues and the government delivers on declarations of more funding, the future could look bright for doctors, nurses and other health staff. They will surely be hoping so after a gruelling few months.

But while warm sentiments and pay rises – for some – are promising, NHS staff could legitimately be worried about what the current pandemic-induced recession could mean for them. Sajid Javid’s announcement of an end to austerity in September of 2019 was made before COVID-19 forced businesses and offices across the country – and indeed the world – to close, triggering the deepest recession on record

Might politicians be tempted to return to austerity measures, which saw public sector workers’ wages fall in real terms and a slowdown in NHS funding, in an attempt to restore our economy to health? How else might the Covid-19 pandemic affect health policy in the near future?

George Osborne, Chancellor of the Exchequer between 2010 and 2016 and architect of Britain’s post-2008 crash austerity economics, has warned that public sector debt will eventually need to be brought down. In August, national debt exceeded £2 trillion for the first time, following unprecedented spending and borrowing to support jobs and businesses during the pandemic.

However, in June, Prime Minister Boris Johnson pledged not to return to “the austerity of 10 years ago” – but that was before the economic impact of lockdown was truly realised.

A major demand on public sector spending has been the furlough scheme, whereby the government paid up to 80% of workers’ wages while they stayed at home. By mid-August, the programme had supported nearly 10 million people and cost the Exchequer a grand total of £34.7 billion. In spite of warnings that ending the scheme could fuel unemployment, it is due to end in October.

Experts have suggested that extending the furlough scheme – as has just been done in Germany – could ultimately pay for itself, as it would prevent an uptick in unemployment benefit claimants. 

Economists and academics disagree over the benefits of austerity. One of the policy’s most vocal opponents is former Greek Finance Minister and economist Yanis Varoufakis, who said in 2015 that the British government’s pursuit of austerity amounted to “class war”. Varoufakis called the idea of “impoverishment of debt” a “smokescreen” and said he could not see any justification for the supposed “urgency” in reducing it.

In June, a panel of UK economists almost unanimously agreed that they were not concerned about the current deficit. This outlook contrasts sharply with a decade ago, when many in the profession warned against government spending as a way out of the recession. But opinion was divided even then, with the leadership of the IMF and US Federal Reserve coming out in favour of public spending as an economic remedy.

“The end of the furlough scheme will be potentially devastating for hundreds of thousands of workers whose jobs it currently supports.”

Decisions over the NHS’s financial future will be as political as they are economic. In 2015, Yanis Varoufakis argued that the UK government’s real motivation for austerity politics was shrinking the state; today, massive public spending and more interventionist policies such as the new campaign against obesity could indicate a shift away from traditional small-state fiscal conservatism.

The end of the furlough scheme will be potentially devastating for hundreds of thousands of workers whose jobs it currently supports. But Sunak’s response to those calling for its extension at least suggests a return to austerity is unlikely. The Chancellor has said it would be irresponsible to keep people “trapped in a job that can only exist because of a government subsidy”, and has since offered £1000 to employers for every furloughed worker they retain. The government is also continuing to offer its ‘bounce back’ loan scheme to small and medium-sized businesses. 

Meanwhile, Boris Johnson recently announced an additional £3 billion in funding for the NHS to prepare for a second Covid-19 wave. These are all indications that the Exchequer’s office is committing to further government spending rather than tightening the purse strings – at least for now.

If he does decide to sustain public health spending, Sunak will inevitably be questioned on where exactly the money is coming from. Recent speculation about potential tax increases has revealed tensions in the cabinet, with one minister publicly warning the chancellor against such a measure. Sunak was eventually forced to promise there will not be a “horror show of tax rises with no end in sight”, though fiscally conservative Tory MPs are unlikely to be pacified by his words.

Whilst it looks like public spending is set to continue for the time being, other new NHS policy suggests change may nevertheless be afoot. In July, the government shared plans for a radical shake-up of NHS organisation, reportedly in response to ministers’ frustration at a perceived lack of control over the health service during the pandemic. The reorganisation could mean more centralised authority in the hands of government.

As with the government’s attitude to public spending, a restructuring of our health service to strengthen political control would be incongruous with decades of health policy. In 2002, Tony Blair created foundation trust hospitals – a system designed to free the best hospitals from government oversight of their clinical and financial management. Abolishing foundation trusts, as proposed, would give ministers greater control over all UK hospitals.

Health minister Matt Hancock’s decision to axe Public Health England, supposedly on account of their marred track record on testing for the virus and counting deaths, is also evidence that ministers are willing and able to initiate major change to health policy in response to perceived failures.

In terms of finances, scratching below the surface indicates generosity towards the NHS may not be all that it seems. A recent above-inflation pay rise for doctors, dentists and police officers (among other public sector workers) was welcomed by many after a decade-long public-sector pay freeze. But others have taken to the streets to protest the exclusion of nurses from the pay increase; nurses and junior doctors agreed a three-year deal in 2018.

“After a decade of austerity, the pay rise will act only as a remedy to years of real-term pay cuts for NHS staff.”

Furthermore, government departments have been asked to find the money for the pay rise themselves; the new policy does not represent a rise in departmental budgets. And after a decade of austerity, the pay rise will act only as a remedy to years of real-term pay cuts for NHS staff.

Rishi Sunak took up his role as Chancellor of the Exchequer only in February of this year but has already overseen unprecedented levels of government spending. Johnson’s promise to not return to austerity is incongruous with much of government policy since 2010.

But Sunak, together with Johnson and Matt Hancock, will need to balance disparate demands in their management of health sector spending and policy: widespread support for the NHS; mitigating against a second wave; and our ever-bigger public debt. We will find out over the coming months whether the government will opt for the austerity measures of their predecessors, or sustain the levels of spending promised by the Exchequer in the early days of the pandemic.