Brexit could hit NHS if economy flatlines

The big red bus emblazoned with the pledge to channel £350 million in European funds to the NHS is one of the most enduring and incendiary images of Brexit. Fronted by Boris Johnson and a series of high-profile Leave campaigners, it symbolised a high watermark in the divisive public campaign for Britain’s future.

Its significance in persuading 52 per cent of the public to turn away from Europe will be debated well into the future, but the present problem is how to stabilise the NHS as it lurches towards a critical existence on financial life support.

The health service’s ability to withstand sudden surges is being questioned as it expends every ounce of capability dealing with ever-rising demand and an inexorable demographic tidal wave. The population is growing and we are living longer with more chronic conditions at the very time national finances are being squeezed by global economic forces and the uncertainty caused by the referendum decision to leave the European Union.

The NHS is largely funded by general taxation, so its fiscal health is linked to the state of the economy. With two-thirds of NHS trusts in England running a deficit, the balance is precarious.

Economic ice age

Despite huge criticism, the last two governments have spared health the full blade of its austerity cuts, but the fallout from Brexit contaminates the NHS’s future. Aside from the ideology, the cold numbers post-referendum are chilling: the UK’s trade deficit widened to a seven-month high in August and the pound slipped below $1.30; it was $1.50 pre-Brexit.

Clinical staff at A and E Wigan_2

Clinical staff at a busy A&E depart­ment in Wigan

Markets fluctuate on trading positions unrelated to public health services and their capricious nature alone is no reason to push the panic button but, taken with a prolonged period of efficiency savings or cuts, the fear is the NHS is being hampered by the frostbite of an advancing economic ice age.

“The direct impact of Brexit is already happening and one of the key issues is related to the value of sterling. If people in the NHS are working here partly on the basis of sending money back home, then the value of that money has plummeted,” says Sally Gainsbury, senior policy analyst for the Nuffield Trust, the independent health research charity.

“This is compounded by the fact that NHS wages have been all but frozen for the last five years and few people think Brexit will have a positive impact.”

A down-graded economy will make it harder for NHS trusts to keep pace with the 4 per cent annual savings required to bridge a funding and delivery gap of around £22 billion over the next four years. NHS costs are basically outstripping funding, but the government believes 4 per cent annual savings will balance the books.

“That level of saving has never been achieved and doubles what has been possible over the last four years of cuts,” says Ms Gainsbury, whose report Feeling the crunch: NHS finances to 2020 questions if the NHS can make the savings without compromising services.

“The ability of the NHS to withstand shocks such as a sudden winter crisis has been degraded; people are saying that winter lasts all year in the NHS now. There is already an inability to deal with the volumes of patients coming through and it will take three years of double those cost cuts before we would have some money to invest,” she says.

“In an ideal world, commissioners will be able to come up with schemes that successfully and genuinely reduce demand for NHS services or reprovide services in different settings that are cheaper without damaging public access to health. But I fear the only way they can spend less is by rationing. We already have examples where CCGs [clinical commissioning groups] are raising the thresholds saying you can’t get treatment until you reach X, Y or Z. I think people are now looking at clinical justifications they wouldn’t have looked at before.”

Crude rationing, such as restrictions on hip operations and cataract surgery, will spread with non-urgent operations postponed, she says. It is a view shared by the Royal College of Surgeons, which is concerned that patients will be forced to endure longer waiting times unless NHS funds are boosted.

But the Department of Health appeared to have fared well in last November’s Spending Review when then-chancellor George Osborne pledged an additional £8.4 billion above inflation for the NHS by 2020-21. Investments were promised across scientific research, mental health, cancer, dementia and new hospitals in a strategy aimed at providing 800,000 more operations and treatments, 5.5 million more outpatients’ appointments and over 100 million more free prescriptions.

Graph showing NHS spending budget to 2020

Discouraging the brightest brains

But the cross-party House of Commons select committee on health warned it was simply not enough to meet targets set out in the government’s showpiece NHS regeneration strategy, the Five-Year Forward View.

Their concern was echoed by Richard Murray, director of policy at independent health charity The King’s Fund, who says: “The government must review its priorities for the NHS and be honest with the public about what the service can deliver with the funding it has been allocated.”

Ben Bradshaw, Labour MP for Exeter and a health committee member, is also concerned that a post-Brexit malaise will slow innovation, reduce the nation’s medical research potency and discourage the brightest brains from viewing Britain as a fulcrum for scientific advancement.

“The impact of Brexit will depend on how the government responds to the economic shock it has caused,” he says. “We were very clear in the select committee that the current level of NHS funding is not sustainable if services are going to be maintained, let alone improved.

Brexit can only compound the perilous position the NHS is in – the NHS was already in a perfect storm and it has just got a whole lot worse

“It will have an effect on the public finances unless the government responds with a radical change of direction on the NHS and public spending in general. But the negativity will hit the NHS quite quickly because there is huge uncertainty on the status on EU nationals who keep the NHS going in many parts of the country. Confidence and morale are important, and morale was already at rock bottom

“Given the importance of science and technology in helping us manage increasing demand and develop new and effective treatments, I am concerned that progress with technology and innovation will be slowed. One of the very alarming things we were told by Sir Bruce Keogh [NHS England medical director] when he and Simon Stevens [NHS England chief executive] came before the committee just before recess was that the referendum has already had an impact on our ability to tap into shared science and funding, and also to attract scientific talent.”

The select committee is now restructuring its work schedule to cope with the complexities of a European exit, which will involve unravelling EU legislation covering public health issues such as food safety, and water and air quality, as well as health issues.

“Brexit can only compound the perilous position the NHS is in,” adds Mr Bradshaw. “The NHS was already in a perfect storm and it has just got a whole lot worse.”

Health secretary Jeremy Hunt, commenting before the referendum, said it was inevitable a Leave vote would cause volatility, and hit the NHS and all public services if the economy contracted by a predicted 5 per cent. His stark message was: “This would inevitably mean less money for public services like the NHS.”

NHS Improvement, the body that oversees NHS-funded care, has launched a series of incentive measures to ease the NHS trusts’ quest to defray their deficits and the £14-billion Sustainability and Transformation Fund, which aims to provide new models of care, promises light at the end of the tunnel, if the compelling urge to use it to plug funding gaps can be resisted.


The £14 billion set aside for the radical transformation of the NHS seems like a lottery win with funds showering down over five years into 44 clusters of trusts and clinical commissioning groups to promote better, more responsive and cost-efficient services that will improve public health and wellbeing.

The designated areas will be able to access £2.1 billion a year from the fund to launch coherent and effective services that meet local needs, with the aim of treating more patients outside hospitals as different elements of care unite for a seamless service.

But the fear is that it will be used to cover the operational deficits that infect two-thirds of NHS trusts.

“It is supposed to be about new services, but the bulk of it may have to go to bailing out hospitals because the NHS has systematically cut the amount they get paid over the last five years, which is why we have ended up with hospital deficits,” says Sally Gainsbury of the Nuffield Trust.

“Hospitals are leaner and cheaper, but have only managed to make half of the 4 per cent cuts needed, so if that continues the Sustainability and Transformation Fund will get swallowed up, leaving little money for modernising and reshaping the NHS. The danger is that it will be used as a sticking plaster that won’t even cover the deficits.”

She predicts that £1.8 billion of next year’s allocation will go on deficits, leaving just £393 million for transformation.