Covid-19 to cause NHS funding pressures for many years to come, new report finds

A new report published by Cardiff University’s Wales Governance Centre argues post-pandemic health pressures and current UK government spending plans suggest tough decisions and trade-offs for the next Welsh Government.

The report finds there is a significant funding gap between projected consequentials stemming from health spending by the UK government in England and total funding pressures for the NHS in Wales, including the legacy costs of the pandemic. This shortfall could peak at £740 million in 2022-23, and average £360 million a year from 2023-24 to 2025-26.

As well as assessing pre-pandemic trends in NHS spending and underlying spending pressures from an ageing population, the report analyses how the Covid-19 pandemic will cause significant additional funding pressures for the NHS over the course of the next Senedd term. The factors considered include:

• The direct costs of Covid-19 over coming years, such as ongoing costs for the Test, Trace, Protect programme and potential future revaccinations;
• Productivity losses as a result of social distancing and heightened infection control;
• The cost of clearing the backlog in elective care waiting lists;
• New demands on the NHS, such as on mental health services.

The report also details how the Welsh Government allocated an additional £1.4 billion to the NHS for 2020-21 in response to the Covid-19 pandemic.

The report estimates that the cost of PPE and the devolved element of the test and trace system in Wales (£533 million) was approximately half the level of consequentials stemming from English spending on test and trace and PPE (£1,084 million). These costs were £158 per person lower in Wales than in England. This was a major contributing factor to the Welsh Government’s ability to carry forward £500 million of Covid-19 funding from 2020-21 to 2021-22.

£440 million has so far been allocated for NHS Covid-19 costs in the first six months of 2021-22. The direct and indirect costs of Covid-19 will continue well beyond this point.

Guto Ifan, a researcher on the Wales Fiscal Analysis project, commented:

“While the Welsh Government appears to be in a position to meet funding pressures this year, in the face of significant post-pandemic spending pressures, the outlook for the Welsh budget is relatively austere.

“Current UK government spending plans contain no Covid-19 related funding for years after 2021-22 and assume NHS spending in England returns to pre-Covid-19 multi-year spending plans next year.

“Only passing on health-related consequentials to the NHS would likely fall short of funding pressures but would still entail cutting most other areas of the budget in 2022-23.

“The next Welsh Government will need to balance these additional pressures against huge funding challenges elsewhere in the budget and the potential use of devolved tax levers.”