Brexit and the NHS: Just the Facts. Part 4: Show Me The Money

In a multi-part series juniordoctorblog.com looks in-depth at the potential impact a No Deal Brexit will have on the NHS. In Part 1, we looked at the impact on the supply of medicines, in Part 2 we examined the barriers to importing nuclear isotopes and in Part 3 we examined the current NHS staffing crisis through the new lens of a No Deal Brexit.

In this final part, we look in-depth at the NHS books and ask do we have the resources and funding to survive a No Deal scenario?

Before going any further, it’s important to establish a few key facts about NHS funding.

Firstly, as a publicly funded institution the NHS budget is set centrally by government and various affiliated semi-government bodies. In addition several charitable and research organisations donate money and resources for specific NHS services.

Secondly it’s vital to understand that the NHS requires more money each year than the previous, to maintain the same standard of care. There are many reasons for this, the smallest of which is an expanding population. Currency inflation is another. However, the main reason is something called “health inflation” – above currency inflation, this is the concept of the continuous rise in costs in any state of the art healthcare system. This takes into account things like the rising cost of new medicines and new technologies, an ageing population, and more and more people surviving conditions that previously would’ve been fatal, therefore going on to require more complex and advanced healthcare. This has been the case for 70 years. Since the beginning of the NHS activity has increased by roughly 4% every year, and the NHS budget on average has risen by 3-4% every year in step.

So what’s going on right now with NHS funding?

Since 2010 there has been a near funding freeze on the NHS, with the budget rising just 0.9% every year, while demand and activity relentlessly grow. The NHS ran a surplus of £1.5bn 2010/11, it now runs an underlying deficit of up to £5.9bn in 2017/8. Increasing service activity have been paid for by a combination of backroom cuts; selling assets like land and transferring investment budgets into day to day running costs, as well as front line cuts: mental health nurses, closing maternities and A&Es, cutting nursing bursaries. Year on year the NHS in England has had to stretch more and more from the same budget, for 8 years.

Wasn’t this a good thing? More efficiency right?

The NHS was already ranked one of the most “efficient” healthcare systems in the world in 2012- mostly due to primary care triaging, the lack of insurance paperwork and payments bureaucracy and use of generic medications.

There is always room to improve however, especially in an organisation with a budget of £115 billion a year. The Carter report suggested getting rid of unwarranted variation in procurement and practice between hospitals could save as much as £5billion (albeit correcting some of the identified areas would take significant investment itself).

However, there is only so much fat to trim, in what was already a comparatively lean system. Relative to inflation the NHS has already cut pay to its staff for the last 8 years, in some staff groups as high as 25%. The land has already been sold, all the clever accounting cards already played. The deficit is £6bn and the NHS already predicted it needed £30bn by 2020 just to keep the lights on, and has only received £4bn to date.

Everywhere the alarms are suggesting there isn’t much more to give: A&E waits are the longest ever recorded and the target has been scrapped, operation and cancer waiting times are at all time highs and staff morale is at rock bottom.

This was the situation BEFORE Brexit.

How does a No Deal Brexit change any of this?

In addition to the additional costs to import medicines and isotopes across new borders, and the agency fees to fill vacancies we cannot recruit to, No Deal Brexit will hit the NHS in the one area it is threadbare; it’s pocket.

A No Deal scenario effectively removes the U.K. from the free trade area of the EU, an economy worth 22% of global GDP, and the 60+ countries the EU has FTA agreements with: Canada and Japan most recently. Once out of FTA trading these countries would be obligated to charge tariffs on exported goods and supply chains based in the U.K including car manufacturing, farm produce and pharmaceuticals. With loss of the financial ability to “passport” services to the EU the financial services sector, 6.5% of our economy, would be hit very hard. The Department for Brexit’s own figures estimate a No Deal to cost £159bn to the U.K. economy by 2030. That’s the entire NHS England and U.K. schools budget combined.

But can’t the U.K. just make our own trade deals?

Potentially yes, but there are multiple barriers to making that a reality: negotiation time (usually years), the approval of the other WTO states and even potentially the approval of the EU with countries like Canada and Japan as part of their FTA in the first place. Most of the “high profile” trade deals we are courting lately; South Africa, Canada, Japan, are all countries we ALREADY have excellent trade deals. For example, the South Africa-EU FTA allows us tariff free trade on 90% of everything we exchange: a deal that’s already increased bilateral trade by 120%. If we do renegotiate we do so from a weaker position; a much smaller individual economy, with weakened buying power, in a desperate position. Secondly pretending these are deals which will equal the loss of trade between the U.K. and the EU in the event of No Deal doesn’t add up: 50% of foreign trade is done with the EU, our next largest partner is Germany by itself, at just over 10%. The USA is close behind with ~10%. South Africa is <1%. If we lost 20% of trade with the EU we would have to increase trade by 100% with the USA to compensate. Countries we already trade with and many that we have free trade agreements with right now.

So a No Deal Brexit will hit the economy a little, what’s the big deal?

In healthcare money means lives. Less money leads to less resources which in turn causes more harm and more avoidable deaths. An analogous scenario is the 2008 financial crash. Fraudulent banking practices in the US housing market triggered a worldwide recession as major banks that had bet heavily on dodgy mortgage products lost, and went bust in the process. Worldwide in countries where healthcare was linked to employment, there was a spike in cancer deaths, estimated at 500,000 excess deaths that otherwise wouldn’t have occurred.

In the U.K., due to the NHS model, we were insulated from this effect. The decision of the Tory coalition however to impose austerity in response to the financial crash had its own effects. A study in 2015 and a further study in 2017 concluded that as many as 50,000 “excess” deaths occurred between 2010-14 and up to 150,000 by 2020 due to cuts in health and social care. With the lack of staff, lack of resources and general decline in every outcome measure of safety and quality this is no surprise.

We are in the exact same scenario as 2008 once again, except this time the NHS is not in good health going in. Despite all this, the current government seems unwilling to countenance the realities. Theresa May even linked her proposed funding increases for the NHS, £20bn a year extra by 2021, to a Brexit “dividend”. *Sigh*.

Is there a Brexit dividend?

Short answer: No

Long answer:

Each year we pay £13bn into the EU and get around £7bn back as an immediate rebate, and then further subsidies, for example to British farming, leaving £6bn going to the EU each year, or £120m a week, or 26p a day per person.

For that amount we have access to 27 Free trade countries worth £350bn a year to the U.K. in trade, as well as 60+ further countries via EU agreements. The CBI estimates this is worth £3000/year per household, or £2 a day per person, eight times what it costs.

In the event of leaving the EU, we gain the balance contribution, but the trade we lose has to then be factored in, the corresponding hit to the economy and the subsidies we would then have to pay ourselves to our own industries. The OBR already estimated we have lost £15bn in economic activity due to the Brexit vote, and even if that were not the case and there were really was a Brexit dividend the government has already promised to spend it several times over.

Specific post-Brexit spending has been promised to: a U.K. satellite system (£100m), a new customs solution and border infrastructure (up to £20bn), storing 6 weeks of medicines (£2bn), a “divorce bill” (est. at least £18bn by 2028), several thousand more civil servants and customs officers, new staff for an expanded civil aviation authority, a new border solution in Northen Ireland, an entirely new authority for food and animal trading and new lorry waiting parks to mention but a few.

On top of that the missed opportunity of firms taking a look at the chaos and uncertainty and deciding to contract elsewhere. Whatever tiny amount we get back from the EU is going to be lost in a deluge of direct and indirect losses.

What does that have to do with the NHS?

Despite promises of another “£20bn” for the NHS, budget after budget will have black holes that need filling, and the chance of any new money, let alone current funding, becomes more and more remote.

Meanwhile, demand will continue to rise. There will be 3,000,000 more over 80s in the U.K. by 2037, a group of patients that costs an average around £7000 a year in healthcare. Increased survival, technology, wage inflation and likely higher currency inflation will all continue to increase the cost of the service we currently have.

Are you done now?

Nearly.

To be very clear, the crisis state of the NHS is not the fault of Brexiteers and voting Leave was not a vote for this. Be that as it may, a No Deal Brexit reality will throw up new barriers to importing medicines and isotopes for cancer diagnostics, push existing EU staff away and stop new staff from coming, and throttle any hope of new funding. Worse, when we should’ve spent two years debating about how to fund the health and social care system we have, how to staff it and supply it, we’ve been talking about Brexit. All other political issues have also been put on hold; teachers, policing, welfare. Brexit isn’t the root cause of the NHS’ problems, far from it, but it may prove to be the straw that broke the camel’s back, a No Deal scenario even more so.

Informed consent is the absolute bedrock of medicine. It’s my job as a professional to fully inform you of the options and you then make a decision knowing every risk and benefit. I’ve never heard a position on Brexit that involved Euratom, the EMA or EU nursing applications. Who knew this stuff? I have to admit, I didn’t. Find me someone who voted Leave that did. I haven’t so far. We can now see the shape of Brexit, for the NHS at least, you are now properly informed. Democracy requires everyone has the same set of facts before they make their opinion. Here are the facts.

The question is what are you going to do about it?

Juniordoctorblog.com

References

https://en.m.wikipedia.org/wiki/List_of_the_largest_trading_partners_of_United_Kingdom

https://www.google.com/amp/s/www.bbc.co.uk/news/amp/uk-politics-42559845

https://www.kingsfund.org.uk/projects/nhs-in-a-nutshell/nhs-budget

https://www.kingsfund.org.uk/projects/nhs-in-a-nutshell/how-nhs-funded

http://www.pharmatimes.com/news/nhs_bodies_delivered_1.5_billion_surplus_in_201011_980543

https://www.nuffieldtrust.org.uk/research/the-bottom-line-understanding-the-nhs-deficit-and-why-it-won-t-go-away

https://www.google.com/amp/s/www.telegraph.co.uk/news/2016/05/25/financial-crisis-caused-500000-extra-cancer-death-according-to-l/amp/

https://www.bbc.co.uk/news/uk-24831941

https://www.google.com/amp/s/amp.theguardian.com/society/2016/feb/01/ageing-britain-two-fifths-nhs-budget-spent-over-65s

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