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New research from the Institute for Fiscal Studies (IFS) shows that if the NHS workforce plan is be delivered, almost half of public sector workers, and around one in eleven workers overall, would be employed by the NHS.
The independent report is a pre-released chapter of the 2023 IFS Green Budget (produced in association with Citi and with funding from the Nuffield Foundation). The chapter considers the implications of the NHS workforce plan for the total size of the NHS workforce and NHS funding, on the assumption that it is implemented and achieved in full.
The plan estimates that the NHS in England will need around 60% more staff by 2036–37 and implies annual NHS budget increases of around 3.6% per year in real terms (or 70% in total by 2036–37). This would be in line with the long-run average real-terms growth rate in UK health spending (3.6% per year from 1949–50 to 2022–23).
This would be returning to the NHS’s long-run average funding growth rate. Yet, this will only be enough to meet NHS demand if productivity can be increased by between 1.5% and 2% per year. It said that this is an extremely ambitious target well above what the NHS is estimated to have achieved in the past.
Workforce plan will create difficult fiscal decisions at future Spending Reviews
The plan aims to increase the number of staff employed by the English NHS from around 1.5 million in 2021–22 to between 2.3 and 2.4 million in 2036–37. This would be equivalent to average growth in the size of the NHS workforce of between 3.1% and 3.4% per year. For context, it estimates that NHS staffing numbers grew by around 1.1% per year between 2009–10 and 2019–20.
In addition, the IFS said that while the plan included £2.4 billion of additional funding for the training of new staff, it did not consider the (much larger) medium-term implications of this large increase in staffing for the NHS paybill, nor the required increase in other inputs if the NHS is to treat substantially more patients.
It says this will mean difficult fiscal decisions at future Spending Reviews.
Max Warner, Research Economist at IFS and an author of the research, said: “The publication of the NHS workforce plan and its detailed workforce projections is an important and welcome milestone for the NHS. We estimate that the plan might imply average real-terms funding growth of around 3.6% per year for the NHS in England. That is by no means outlandish by historical standards, but would nonetheless require difficult fiscal decisions in the current climate of sluggish growth.
“NHS modelling suggests that even these large staffing increases will only be “enough” to meet future demand if staff productivity can be increased by a highly ambitious 1.5% to 2% per year. The risk of having a workforce plan but no similarly high-profile plan for capital, technology or management is that higher spending on staffing squeezes out other vital inputs, and makes those productivity gains all but impossible to achieve.”
The report adds that under a range of assumptions about both staffing and non-staffing costs, it estimates that NHS resource (day-to-day) funding will need to increase by between 2.4% and 4.4% per year (a total increase of between 42% and 90% between 2021–22 and 2036–37) to match the costs implied by the workforce plan, with a central estimate of 3.6% per year (70% total increase).
In the central case, spending on the NHS in England would be around 2% of GDP higher by 2036–37, relative to 2021–22 (the starting point for the workforce plan). That is equivalent to around an extra £50 billion in today’s terms. To give a sense of scale, raising that sort of sum would require increasing the standard rate of VAT from 20% to around 27% by 2036–37, or increasing all income tax rates by around 6 percentage points. Other funding options would of course be available.
The IFS said that this all assumes that staffing increases exactly as set out in the workforce plan. But even by the NHS’s own estimates, this will only be ‘enough’ to meet demands on the service if labour productivity within the health service grows by between 1.5% and 2.0% each year. This could prove to be too optimistic: it would mean doubling the average rate of productivity growth seen between 1995–96 and 2019–20 (0.8%).
We have an ageing population with increasingly complex needs
The NHS Confederation said that the workforce plan will require long term funding if it’s to be rolled out successfully, and health leaders will agree that NHS funding should revert to the long run average growth rate to be in line with the ever-growing demand the NHS faces.
Danny Mortimer, deputy chief executive added: “This investment needs to not just expand numbers but also improve working conditions and reward and accelerate access to careers. It also needs to be matched by investment in technology and working environments to support healthcare staff to work effectively and efficiently.
“We have an ageing and growing population, with increasingly complex needs, so it’s vital that funding grows in line with demand. The IFS make clear how much is needed to grow the workforce in the long-term; with every £1 invested in the NHS resulting in a £4 return to the economy, an increase of this scale to fund the additional staffing the NHS needs would be good for both the health service and the well-being of the wider economy.
“Finally investment in the health service without corresponding action for social care services is profoundly unwise. For our part, we repeat our call for a comprehensive and equivalent workforce plan for social care.”