Government misses golden opportunity to boost NHS funding in Budget

Government misses golden opportunity to boost NHS funding in Budget

First thoughts on Budget and NHS Change 

NHS investment

Clive Makombera, head of NHS at leading audit, tax and consulting firm RSM UK comments: “It remains to be seen whether the Chancellor’s investment in the NHS is enough to deliver 2% productivity growth next year especially given that the sector continues to face crippling staff shortages. In addition to the funding announced in the Budget, the NHS needs more staff to take on extra shifts, which is a challenge when vacancies are high, and staff are overworked and under extreme pressure. 

“The injection of capital investment is clearly needed but the government failed to clarify if these will be one off or recurring payments. The NHS needs investment for capital as well as revenue to cover running costs, but there was little clarity on the funding and delivery timeline for the new buildings announced in the Budget.

“Concrete plans for investing in social care were also not announced and this will impact government plans to shift from hospital to community. Without a clear roadmap for social care, hospitals will remain overwhelmed.

“The £2bn earmarked for technology isn’t nearly enough for the major patient record reforms needed and risks adding yet another layer of technology into an already complex web of systems that aren’t properly integrated. A much larger investment was hoped for to create a whole new uniform system to drive significant efficiencies.”

Employment costs

Suneel Gupta, head of private healthcare at RSM UK said: “Whilst the 6.7% increase in National Living Wage (NLW) is welcome news for care workers, employers in the health and care sector will bear the brunt of this. There will be a significant additional burden placed on employers in the industry as a result of the 1.2% increase in National Insurance contributions and the reduction of the threshold at which employers start paying National Insurance on workers’ earnings from £9,100 to £5,000.

“We see this having a big impact for businesses across the health and care sector that are often heavily dependent on staff which are paid the NLW, as it will place further pressure on already squeezed margins.”

VAT reform

Scott Harwood, VAT partner at RSM UK, added: “The government has missed a golden opportunity to launch the previously planned VAT reforms to add additional funds into the NHS.

“It’s disappointing Rachel Reeves didn’t announce the planned VAT reform which could have injected billions more into the NHS, plus greatly simplified their tax position. The consultation was launched under the Conservative government with the aim of moving from a complex scheme where the NHS obtains only a small VAT rebate each year to a much simpler system where the NHS can get all their VAT costs refunded – which amounts to around £10-£15bn per year (including government departments).

“At present we are short on detail around the reforms of the NHS sector. Expanding use of private medical facilities, insourcing and more flexible contracting is all needed but these also bring tax complexities which can limit their effectiveness. This Budget was an opportunity to introduce new tax reliefs to ease some of these tax hurdles.”