The headline figures for hospitals are largely positive, with hospitals benefiting as political parties compete to prove their commitment to the NHS. Spending was protected and rose after 2009/10. An increasing number of permanent staff, working more productively, have helped to maintain high standards of clinical care despite increasing workloads.

But beneath these headline figures there are reasons for concern. An increase in the use of temporary workers and longer waiting times suggest that hospitals are struggling to keep up with demand, and they continue to run financial deficits

The future funding for hospitals implied in the NHS England settlement may not be enough to allow them to meet rising demand or achieve the expansion of services outlined in the NHS long-term plan.

There are five different types of health care trusts in England, which provide different forms of care: acute, ambulance, community, mental health and specialist trusts. Collectively, they are known as NHS providers. This chapter focuses on acute and specialist trusts – what most would consider hospitals – which provide specific short-term treatments, including specialist diagnostic services, emergency treatments and surgeries. As data pertaining solely to acute and specialist trusts is not always available, where appropriate we analyse data for all NHS providers.

Spending on hospitals has increased by 19.1% since 2009/10

Change in spending on NHS providers in England since 2009/10 (real terms)

NHS spending has increased over the past nine years, but growth has been below historic rates.[1] Acute and specialist providers’ income – primarily government payments to provide patient care – was £69.1 billion (bn) in 2018/19[2] and increased by 4.5% in real terms between 2016/17 and 2018/19, the only years for which we have consistent data.

We do not know how acute and specialist spending changed before then, but  spending on NHS providers in England rose by 19.1% in real terms between 2009/10 and 2018/19 to reach £86.8bn. Acute and specialist trust spending probably increased faster, as the 2016/17–2018/19 rate was quicker than the increase in overall NHS provider spending (3.5% over the same period).

The rate of spending growth between 2017/18 and 2018/19 is set to continue. The new NHS England spending settlement announced in June 2018 promised that funding will increase by 3.4% in real terms each year on average over the next five years, amounting to £20.5bn of additional funding by 2023/24.[3] But this new funding settlement promised that spending on mental health, community and primary care[4] would rise faster than the overall NHS budget, meaning that funding for acute and specialist hospitals will increase at a slower rate.[5]

Demand for hospital services continues to grow

Change in estimated demand for acute care since 2009/10A larger and older population is increasing demand for hospital services, as is the number of patients with multiple chronic conditions. The population of England grew by 6.4% between 2010 and 2018; the number of people aged 65 and over grew faster, by 19.1%, over this same period.[6] This is significant as older people use hospitals more frequently: in 2017/18, those aged 65 and over made up 41.8% of finished consultant episodes (completed periods of care), despite making up just 18% of the population.[7]

Using the then Department of Health’s (DH)* 2011 estimates of the need for acute services for each age/sex group, we estimate that demand for acute services grew by 10.7% between 2009/10 and 2018/19.[8,9] However, this does not account for any increases in single morbidity or multimorbidity (when someone has one or more than one chronic illness, respectively), or long-term health conditions.

The rise in multimorbidity, in particular, is increasing demand for hospital services. In 2012, the DH estimated that treating patients with multiple chronic conditions accounted for 70% of total spending.[10] The proportion of adults reporting at least one long-term condition increased only one percentage point between 2010 and 2017, from 42% to 43%,[11] but there is clearer evidence that multimorbidity has risen.

The Health Foundation found that the proportion of people admitted to hospital as an emergency with five or more health conditions more than tripled between 2006/07 and 2015/16, while the number of emergency admissions for people with just one condition fell by 34% over the same period.[12]

More people are spending a greater proportion of their lives in ill-health. This is because life expectancy (how long a person can expect to live) has risen faster than healthy life expectancy (how long a person can expect to live in good health without medical complications) in relative and absolute terms for the population in England since 2010.[13]

* The DH was renamed the Department of Health and Social Care (DHSC) in 2018.

The number of permanent staff has increased…

Change in the total number of doctors and nurses in NHS trusts and clinical commissioning groups since September 2009

There are now more full-time-equivalent doctors, and more adult and children’s nurses, working in NHS providers than in the past. In part, this is a response to the 2013 Francis Inquiry into Mid Staffordshire NHS Foundation Trust, which found that inadequate staffing compromised patient safety.[14]

Between May 2010 and May 2019, the number of full-time-equivalent* doctors working in NHS providers increased by 15.5%, from 85,978 to 99,274. The number of adult and children’s nurses increased by 11.8%, from 184,891 to 206,688, over the same period.

Staff costs make up the majority of NHS providers’ expenditure, accounting for £55bn (63.5%) of provider spending in 2018/19.[15] The past three years of data show that spending on staff pay has risen less quickly than the increase in the number of staff. Between 2016/17 (the earliest year for which figures are available) and 2018/19, total NHS provider spending on staff pay increased by 4.6% in real terms, from £50.6bn[16] to £55bn,[17] while the total number of staff working in NHS providers at mid-year grew only 3.4% between September 2016 and September 2018.[18]

While spending on permanent staff has increased, the amount spent on agency staff has fallen. Between 2016/17 and 2018/19, total spending on agency staff fell from £2.9bn to £2.4bn. Spending on agency nurses fell 21.1% in real terms, from £1.2bn to £0.95bn, while spending on medical agency staff fell 14.2% in real terms, from £1.1bn[19] to £0.94bn.[20]

The recent reduction in spending on agency staff is a result of a concerted effort by the NHS to cap agency staff pay. In September 2015, Monitor – the non-departmental body responsible for overseeing NHS trusts – set NHS trusts individual ceilings for the amount they could spend on agency nursing staff. In November of the same year, its successor, NHS Improvement, introduced caps on the hourly rates of all agency staff groups. It then lowered these caps in February 2016 and April 2016. From the original cap of 150% above basic pay for junior doctors, 100% for other medical/clinical staff and 55% for non-clinical staff, all agency staff now have a pay cap of 55% above basic pay.[21]

NHS England made complying with these new measures a condition for NHS trusts to access the Sustainability and Transformation Fund – £1.8bn of additional money provided in 2016/17 to help make NHS trusts “financially sustainable”.[22]

Falling spending on agency workers was partly offset by increasing spending on ‘bank staff’ – internal pools of NHS employees who have agreed to work flexible shifts. Spending on bank staff increased from £3bn[23] in 2017/18 to £3.4bn[24] in 2018/19, a real-terms rise of 13.8%. NHS Improvement estimates that bank staff are 20% cheaper than equivalent agency staff,[25] so trusts are likely to have saved money by hiring bank staff rather than agency staff. But without data on the numbers of bank and agency staff, we cannot calculate the average rates for either or compare them to permanent staff.

To understand how much trusts have saved by reducing spending on agency staff, the government should publish data on the number and type of staff who are temporary and part-time.

* All figures are full-time equivalent unless otherwise stated.

… but hospitals still rely on temporary or part-time staff to fill vacancies

There are, however, a number of reasons for concern about NHS staffing. Unfilled vacancies, struggles with staff retention and the ongoing use of agency staff (despite relative reductions) all point to underlying problems.

The continued use of agency staff, combined with the shift to using bank staff, suggest that part-time and temporary staff are still needed to fill gaps in the workforce. Total spending on the temporary and part-time workforce* – bank and agency staff – rose from £5.4bn to £5.8bn between 2017/18 and 2018/19 (the years for which we have data), a real-terms increase of 6.7%. As a proportion of total staff spending, spending on the temporary and part-time workforce increased from 10.3% to 10.6% of total pay costs over this period.

At the same time, vacancies for permanent roles increased. Between Q4 2015/16 and Q4 2018/19, the number of NHS vacancies increased by 14.7%, from 78,112 to 89,589.[26] The rise in workforce vacancies has primarily been driven by an increase in vacancies for nursing, which increased by 27.8% between Q4 2015/16 and Q4 2018/19, from 29,251 to 37,378.

The number of vacancies is estimated from the number of job advertisements published on the NHS Jobs website, meaning the actual number of vacancies is probably higher because a single job advertisement on the website may advertise multiple vacancies or an ongoing recruitment programme.[27]

Vacancy data from NHS Improvement – taken from trust management information rather than NHS Jobs advertisements – confirms this. This shows that the total number of vacancies is higher, but decreased by 2.4% between 2017/18 and 2018/19, from 98,755 to 96,384. Nursing vacancies continued to increase by 10.4%, from 35,794 to 39,520.[28]

The shortfall in nurses is unlikely to be resolved soon. Applications for UK nursing courses remain 15.6% below the 50,730 applicants in 2010,[29] although rose slightly over the past year, from 40,600 in 2018 to 42,820 in 2019. Although the number began falling in 2014, the big fall came in 2017: it fell by 19.6% compared with 2016.[30] The sharp decline in applications between 2016 and 2017 suggests that the decrease in applications was triggered when the government scrapped nurse training bursaries in 2017 and replaced them with loans.[31]

Uncertainty over the UK’s EU exit terms and future migration policy, alongside changes to language testing rules in 2016,[32] may also have reduced the pool of available labour. Nursing registrations from the EU/EEA fell from 9,389 in 2015/16 to just 805 in 2017/18 – a decrease of 91.5%.[33] As a result, the proportion of new nurses who are EU nationals fell from 19% in 2015/16 to 7.9% in 2017/18. This seems to have affected existing staff, too: the proportion of staff who are EU nationals and who left nursing increased from 8.9% to 12.8% over the same period.[34] Following a consultation, the latest language test (in effect since December 2018) places a lower emphasis on the written part of the test.[35]

Hospitals face problems retaining staff. The median staff stability index – a measure of the proportion of staff who do not leave their role in a given year – for all NHS staff decreased from 89% to 85% between 2010/11 and 2017/18.[36] The stability index for doctors and nurses has remained roughly constant since 2010/11. For Hospital and Community Health Service (HCHS) doctors** it improved slightly, from 84.4% in 2015/16 to 85.3% in 2017/18. Over the same period, the stability index for nurses decreased only slightly, from 88.4% to 88.2%,[37] meaning that a slightly higher proportion of nurses are leaving their roles each year.

There has been a large increase in the number of voluntary resignations among clinical staff. In 2018/19, there were 18,599 voluntary resignations citing work–life balance – 6.1% of the current total clinical staff as of Q3 2018/19.[38] While only a small proportion of the total clinical workforce, this is more than double the rate in 2011/12, when there were 6,699 voluntary resignations citing work–life balance – only 2.4% of the clinical workforce.

* Many agency staff are hired on a temporary basis and NHS Improvement does not classify them as permanent staff. Bank staff are permanent NHS staff who take on additional shifts or permanent NHS staff who have agreed to work flexibly. See NHS Improvement, Performance of the NHS Provider Sector; NHS Improvement, Year Ended 31 March 2017, 2017, p. 15. Some agency and bank staff work full time, but we collectively refer to these staff as temporary staff as they are either non-permanent, part time or both and fill in for full-time, permanent doctors and nurses.

** HCHS doctors include all doctors working in the NHS, but excludes GPs, GP practice staff, and high-street dentists.

Hospital spending on medicines has increased

Beyond staff salaries, the other major area of hospital spending is medicines. Hospital spending on medicines has risen much faster than spending on staff and other inputs since 2010. Estimated* spending on medicines used in hospitals rose from £4.2bn to £9.2bn between 2010/11 and 2017/18 – almost doubling in real terms (95.7%).[39]

Hospitals are spending more on medicines because they are treating more patients[40] and because of the availability of new treatments that require expensive products.[41] While GPs have increasingly been able to substitute expensive branded medicines with cheaper generic alternatives, acute and specialist hospitals have been less able to do this as conditions seen in these hospitals often require the latest, complex – and therefore costly – treatments.[42]

The rapid increase in spending on medicines in hospitals has occurred despite 85% of new medicines being covered by the Pharmaceutical Pricing Regulation Scheme – a voluntary arrangement between the pharmaceutical industry and the government, which is negotiated every five years and caps NHS spending on branded medicines at an agreed rate (the industry refunds any overspend).[43]

In addition to price controls on branded medicines, the NHS intends to save £300m by 2020/21 – around 3% of spending on medicines in the latest year’s data – by using more biosimilar medicines (biologically similar medicines to those that have already been approved) in place of branded medicines.[44]

* We can only estimate spending because NHS Digital reports figures for the ‘net ingredient cost’ of medicines – the cost of all the medicines prescribed in a given year at their list price. This does not account for the cost of VAT or dispensing, or any reduction the NHS can secure through discounts. See NHS Digital, Prescription Cost Analysis, 2019, p. 6, retrieved 16 October 2019,

Hospitals are treating more patients

Change in elective admissions, non-elective admissions, total diagnostic tests and outpatient appointments since Q1 2009/10

There have been large rises in the volume of almost all hospital activities, but accounting for all of this trend is not easy. The number of elective admissions (when patients attend hospital on pre-arranged dates for booked procedures) rose by 23.5%, from 6.9 million (m) to 8.5m, between 2009/10 and 2018/19.[45]

The number of non-elective admissions (typically emergency admissions or transfers from another hospital) increased by 26.1%, from 5.2m to 6.6m. Accident and Emergency (A&E) admissions – a subset of non-elective admissions – increased by 39.5%, from 3.6m in 2009/10 to 4.7m in 2018/19.[46] Outpatient appointments – consultations with a healthcare practitioner – increased by 46.5% during this period, from 84.2m to 123.3m. The number of diagnostics tests rose from 3.7m in Q4 2009/10 to 5.7m in Q4 2018/19, an increase of 54.5%.[47}

Some of the increase in hospital activity is hard to account for – the rate of emergency admissions for acute conditions that do not usually require hospital admission increased by 22.3%[48] between 2009/10 and 2017/18, from 1,083 per 100,000 population in England to 1,324 per 100,000 population, for example. There are several potential reasons for this. Some of the increase may be due to cuts to other services that support people out of hospital, such as adult social care – with the resulting reduced access to these alternative services increasing hospital admissions.

Others may be due to rising patient expectations, which have encouraged doctors to undertake additional treatments. This can manifest through unnecessary prescriptions or diagnostic tests,[49] though we cannot quantify the prevalence of ‘unnecessary’ treatment.

Patient satisfaction and clinical quality have remained high

Overall patient experience scores for adults treated as inpatients since 2009/10

Patient satisfaction in hospitals has remained high. The proportion of adult inpatients – patients referred to hospital who stay overnight – in acute and specialist trusts who say they were satisfied with their overall experience increased slightly from 75.6% in 2009/10 to 76.7% in 2016/17.

Following a change in the question wording, the proportion of inpatients saying they were satisfied fell slightly, from 78.4% in 2017/18 to 76.2% in 2018/19.[50] The proportion of inpatients saying they were satisfied that their care was ‘safe, high quality and co-ordinated’ was lower, and fell from 72.6% to 65.8% between 2017/18 and 2018/19.

Data from the Friends and Family Test – where patients are asked how likely they are to recommend the health service they used – shows that the proportion of inpatients recommending the service increased from 94% to 96% between March 2014 and March 2019. The proportion of respondents recommending A&E services also remained broadly stable during this time, fluctuating between 84% and 86%.[51]

However, satisfaction among the general public – not just those who access hospital services – is lower and falling. The British Social Attitudes (BSA) survey found that the proportion of respondents saying they were very or quite satisfied with the NHS decreased from 64% in 2009 to 53% in 2018. Public satisfaction with A&E similarly fell from 59% to 53% over the same period.

Clinical indicators suggest that the quality of care in hospitals is improving. The number of MRSA (Methicillin-resistant Staphylococcus aureus) and C. difficile cases – health care-associated infections – decreased between 2009/10 and 2018/19, from 1,898 to 805[52] and from 25,604 to 12,275,[53] respectively. There were also declines in rates of new pressure ulcers (bed sores associated with patients who cannot change positions in bed on their own), falls while in hospital and new venous thromboembolism (blood clots forming due to a change in the speed of blood flow).

Overall, the proportion of patients receiving harm-free care has increased, from 92.4% in March 2013 to 93.8% in March 2019.[54]

The improvements in these clinical indicators are corroborated by the performance of hospitals in the Care Quality Commission’s (CQC) inspections. In 2014, 57% of hospitals were listed as Requires Improvement, while 35% were rated as Good or Outstanding.[55] After legislation requiring health and social care providers to adhere to new fundamental standards came into force in April 2015,[56] the proportion of hospitals rated as either Good or Outstanding rose from 56% in 2015/16 to 72% in 2018/19.

Have hospitals become more efficient – and if so, can that be maintained?

Hospitals have become more efficient since 2010 – workloads have risen faster than either spending or staff numbers – but it is unlikely that this trend can be sustained without causing serious dissatisfaction among staff or potentially putting patient safety at risk.

The public sector pay cap has been a particularly important contributor to cost savings in hospitals over the past decade. By holding doctors’ and nurses’ pay growth below economy-wide inflation, NHS providers saved at least £369m[57] over this period:* while the economy-wide price level increased by 8.7% between 2009/10 and 2015/16, the pay of those working in public health care rose by only 6.3%.[58]

The government’s decision to ease the public sector pay cap[59] will, however, limit the scope for further savings on salary costs. To date, hospitals have not restricted spending on other goods and services used to provide care to the same extent. In contrast to wages, the average price for these goods and services increased, by 17.3%, between 2009/10 and 2015/16, almost twice the rate of economy-wide inflation.[60]

Hospital staff have become more productive: the number of appointments and treatments carried out in NHS hospitals has risen faster than staff numbers. The Office for National Statistics estimates that productivity across the whole NHS increased by 8.6% between 2009 and 2015, giving an average annual growth rate of 1.4%.[61] The Centre for Health Economics, an academic research centre, estimates that productivity across the whole NHS then grew by 2.9% between 2015/16 and 2016/17.[62]

One factor that has contributed to this is continued reductions in the average length of hospital stays. These have steadily decreased: in 2009/10, overnight patients spent an average of 5.6 days in hospital, but this had fallen to 4.9 days by 2015/16.[63] As a result, hospitals need fewer beds to treat the same number of patients.

Between early 2011 and early 2019, the number of acute and general overnight beds fell by 5.4%,[64] more than offsetting the 12.9% increase in the number of acute and general day beds. As a result, the total number of beds decreased by 3.7% between March 2011 and March 2019, even though the number of elective inpatient admissions increased by 18.8%.[65] This continues a longer-term trend: the British Medical Association found that the number of beds per 1,000 people in England fell from 3.8 in 2000 to 2.4 in 2015.[66]

NHS Improvement estimates that, overall, NHS providers collectively made ‘efficiencies’ equivalent to 3.7% of spending in both 2016/17[67] and 2017/18,[68] and 3.6% in 2018/19.[69] However, in the most recent year almost a third of these were really non-recurrent savings – achieved by delaying spending such as building maintenance.[70] Discounting these savings, providers managed to make genuine efficiencies worth 2.7% of spending in 2016/17[71] and 2017/18,[72] and 2.4% in 2018/19.[73]

NHS providers’ increasing reliance on delaying non-essential spending has affected NHS capital spending – spending for investment such as new buildings and technology. Between 2010/11 and 2017/18, NHS capital spending fell by 7% in real terms. In part this reflected an active decision in the 2015 spending review to redirect capital spending to day-to-day operations:[74] in total, £2.8bn was transferred from capital to day-to-day budgets between 2016/17 and 2018/19.[75,76]

This appears to have increased the backlog of maintenance in hospitals. The estimated cost to fix high-risk backlog maintenance – where building repairs must be addressed as an urgent priority to prevent major disruption to services or deficiencies in safety[77] – has more than doubled in real terms, from £0.5bn in 2014/15 to £1.1bn in 2018/19.

This provides evidence that some of the ‘savings’ made over the past five years have in fact stored up maintenance problems for later.

It will be difficult to sustain the strategies that have contributed to cost savings and productivity improvements since 2010 – namely public sector pay restraint and asking staff to do more. The public sector pay cap led to increased dissatisfaction among staff with their pay. The proportion of hospital staff who were dissatisfied or very dissatisfied with their pay rose from 36% in 2010 to 45% in 2017.[78] In March 2018, after the government lifted the pay cap, the proportion of staff who were dissatisfied with their pay fell back to 39%, though this is still higher than levels of dissatisfaction in 2010. This suggests it will be difficult to return to pay restraint.

There are also signs that it may be difficult to continue asking staff to do more. The proportion of hospital staff saying they feel unwell due to work-related stress increased from 28% in 2010 to 39% in 2018.[79] The proportion of nurses saying they are under too much pressure increased from 59.4% in 2013 to 62.8% in 2017; for nurses saying they are “too busy to provide the level of care they want to”, it rose from 55.9% to 63%.[80]

These problems may be contributing to an increasing number of voluntary resignations across the clinical workforce, which more than doubled between 2011/12 and 2018/19.[81]

Hospitals may also struggle to safely reduce bed numbers further. High occupancy rates risk health care-associated infections and reduced capacity to respond to  spikes in demand.[82] The right level of occupancy is disputed.[83] The occupancy rate for overnight beds – which currently make up 89% of hospital beds – rose from 88.7% in early 2011 to 91.7% in early 2019. Clinical indicators have continued to improve over this period, suggesting that increased occupancy rates have not yet had a negative impact on patient safety. But NHS Improvement now argues that high occupancy rates have become a constraint.[84]

* This is the difference, in real terms, between actual spending on HCHS doctors and nurses and spending on HCHS doctors and nurses if mean average annual pay per staff member had been held flat in real terms between August 2010 and August 2018. This underestimates the true figure, as it does not account for different pay bands, seniority or changes in working hours.

Have efficiencies been enough to meet demand?

Hospitals have become more efficient, but demand has risen faster. As a result, hospitals are consistently reporting financial deficits and performance against key targets – such as A&E and operation waiting times – has deteriorated.

Percentage of emergency attendees (type 1) admitted, transferred or discharged within four hours since August 2010

The most visible consequence of demand outstripping spending and an increase in efficiency has been longer waiting times for treatments. The NHS has had a target to see at least 95% of patients within four hours of arriving at A&E since 2010 (the target was 98% between 2004 and 2009).[85] But the proportion of patients seen within that target time fell from 98% in Q1 2009 to just 78% in Q1 2019[86] – and the target has not been met since summer 2013.

In addition to continually missing performance targets, seasonal spikes in demand put additional pressure on hospitals. Between 2010/11 and 2017/18, the proportion of patients spending longer than four hours in A&E during winter increased from 6.2% to 22.9%.[87] In the months following winter, it takes hospitals time to recover, affecting the care provided during the rest of the year. As of May 2019, nine in ten hospital trusts were still using ‘escalation beds’ – additional temporary beds introduced during winter to help cope with additional demand.[88]

Queuing has not been confined to A&E:

  • The number of patients not treated within 28 days of a cancelled elective operation more than tripled from 2,258 in 2009/10 to 7,347 in 2018/19.[89]
  • Between March 2010 and March 2019, the proportion of patients beginning treatment for non-urgent conditions within 18 weeks of referral fell from 91.1% to 86.7%.
  • Between March 2010 and March 2019, the waiting list for non-urgent conditions grew from 2.4m to 4.2m patients.[90]
  • The target that 85% of patients should begin cancer treatment within 62 days of an urgent GP referral has not been met since late 2013.
  • The proportion of patients starting cancer treatment within the target time decreased from 86.7% in early 2010 to 77.7% in early 2019.[91]

Total deficit among NHS providers (£bn)

NHS providers – acute trusts in particular – have also consistently overspent their budgets over the past five years. In 2013/14, NHS providers spent £0.1bn more than they had budgeted; but their total deficit rose sharply to £2.4bn in 2015/16, when 66% were in deficit.

After the government introduced the Sustainability and Transformation Fund in 2016/17 – which provided an additional £1.8bn of funding to support frontline services* – the total deficit fell sharply to £0.8bn, while the proportion of trusts in deficit fell to 44%. The deficit across providers has remained roughly stable since,[92] though the number of trusts in deficit increased slightly, to 48%, in 2018/19.[93]

NHS Improvement also estimates that the underlying deficit – a measure of NHS providers’ financial position excluding one-off savings, emergency extra cash and other short-term fixes[94] – was significantly higher, at £4.3bn, in 2017/18 and did not fall between 2017/18 and 2018/19.[95]

Across NHS providers, the biggest contributor to deficits was spending more than expected on staff pay. Staff pay increases announced during the 2018/19 financial year, alongside higher-than-expected spending on agency and bank staff, contributed to a staff pay overspend of almost £2.0bn (3.7%).[96] NHS providers also spent more than expected on consultancy (37.4%), premises (9.2%) and clinical supplies (6.4%), though these only contributed £766m to the deficit.[97]

Only the acute trusts had an overall deficit in 2018/19: their combined deficit was £1.6bn, up from £0.4bn in 2013/14.[98] In contrast, ambulance, community, mental health and specialist trusts ran surpluses.[99]

In 2018/19, the government replaced the Sustainability and Transformation Fund with the Provider Sustainability Fund, a £2.5bn fund held by NHS England and NHS Improvement, which NHS providers can access if they hit certain financial and performance targets.[100] This should help improve NHS providers’ financial position.

The NHS long-term plan has set new targets to reduce waiting times for specialist mental health services, reduce the waiting list for planned surgery and “improve providers’ operational and financial performance”.[101] But the plan’s success will depend on recruiting and retaining enough skilled staff. The NHS Interim People Plan – the NHS plan for how it will recruit and retain enough staff to deliver the long-term plan – accepts that there are at least 40,000 nurse vacancies that it will need to fill by 2024.[102]

Although funding for staff education and training weren’t included in the NHS England spending settlement, the 2019 spending round allocated Health Education England a 3.4% real-terms budget increase between 2019/10 and 2020/21 to boost staff education and training budgets. But the Health Foundation, the King’s Fund and the Nuffield Trust estimate that the budget increase announced for Health Education England next year is only a third of what is required to hire and retain enough staff to deliver the plan.[103]

* Most of the money from the Sustainability and Transformation Fund was given to acute trusts. Of the 217 providers who received money, 129 were acute trusts, which received £1.5bn (or 83.5% of the fund). There are a total of 137 acute trusts in England, meaning 94% of them received at least some money from the fund. See NHS Improvement, Performance of the NHS Provider Sector Year Ended 31 March 2017, 2017, p. 13, retrieved 16 October 2019, report_-_Fin_Accts_-_FINAL.pdf

How will demand for hospitals change?

The government has confirmed spending plans for the NHS up to 2023/24 – one of only two public services (alongside schools) to which the government has made multi-year spending promises beyond 2020/21.

The NHS funding settlement announced in June 2018 provides funding such that the NHS England budget will increase by 3.4% a year on average in real terms between 2019/20 and 2023/24. But unless the NHS can substantially reduce demand or hospitals can make further efficiencies, this may not be enough to maintain the quality of hospital care, while also extending the scope of services in the way envisaged in  the NHS long-term plan.

Based on analysis conducted by the Health Foundation, we project that demand for acute and specialist hospital services – the number of people who will require hospital care – will increase by 14.1% between 2018/19 and 2023/24. In other words, to maintain the scope and quality of care in acute and specialist hospitals in the face of rising demand, hospital spending will need to grow by 14.1%.

After removing money already allocated to primary care,* the remainder of the NHS England budget is set to grow faster than we expect demand to increase, by 18.3% between 2018/19 and 2023/24. As a result, if spending on all NHS services grew at the same rate, then the spending growth implied by the plan would give acute and specialist hospitals £2.9bn extra (over and above what would be needed merely to keep pace with rising demand) to provide additional services or improve performance by 2023/24.

But this is, in fact, likely to overstate the money that will be available to acute and specialist trusts. NHS England has confirmed that spending on mental health and community services will rise faster than the overall NHS budget,[104] and that spending on acute and specialist services will therefore rise more slowly. Unfortunately, it is not possible – given the information published by the government – to work out exactly what the actual rate of spending growth for acute and specialist hospitals will be.

Staff pay increases announced in 2018 will also increase the cost of providing care. The funding available to acute and specialist hospitals may not rise as quickly as demands and costs. Taking announced pay increases into account, the Health Foundation estimates that the additional funding for acute and specialist hospitals under the plan will allow for activity growth of 2.3% a year, while it expects demand to increase by 2.7% a year.[105]

Projected spending and demand for hospitals


Projected increase in demand by 2023/24 14.1%
Spending scenario NHS long-term plan Meet demand
Change in real-terms spending by 2023/24 18.3% 14.1%
Spending in 2023/24 (2018/19 prices) £81.7bn £78.8bn
Projected gap (2018/19 prices) ‑£2.9bn

Source: Institute for Government calculations. See Chapter 13, Methodology.

The government is also committed to expanding the scope of NHS services. The NHS long-term plan set targets to:

  • provide more advanced radiotherapy techniques and immunotherapies for cancer patients and routinely offer genomic testing[106]
  • provide personalised care for every person diagnosed with cancer including a needs assessment, a care plan, and health and wellbeing information[107]
  • increase the use of computed tomography (CT) perfusion scans to assess brain damage after a stroke, improve access to magnetic resonance imaging (MRI) scanning and increase the use of artificial intelligence to interpret CT and MRI scans.[108]

In theory, acute and specialist hospitals could square the circle and increase the scope of services by becoming more productive. NHS Improvement estimates that implied hospital productivity increased by an average of 1.7% a year between 2016/17[109] and 2018/19[110] – faster than the 1.1% a year increase in productivity required over the next five years by the plan.[111]

However, an increasing share of these alleged efficiencies reflects delaying spending or selling assets rather than genuinely delivering more for less. Alongside rising workforce pressures, the scope for more efficient working looks limited.

* See Chapter 13, Methodology.