Implications Of The NHS Workforce Plan

30th August 2023

A report by the Institute for Fiscal Studies published on 30 August 2023. The plan applies to England but may have significant affects on the Scottish NHS in the areas of recruitment and pay.

The NHS workforce plan aims for a large expansion in health service staffing. We examine the potential implications for NHS funding.

1. In June, NHS England published its much-awaited long-term workforce plan, which was welcomed across the political spectrum. 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, we estimate that NHS staffing numbers grew by around 1.1% per year between 2009-10 and 2019-20.

2. If this increase in the NHS workforce is delivered, we estimate that almost half (49%) of public sector workers in England will work for the NHS in 2036-37, compared with 38% in 2021-22 and 29% in 2009–10. By 2036–37, we estimate that one in eleven (9%) of all workers in England will work for the NHS, compared with one in seventeen (6%) in 2021–22 and 2009–10.

3. 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. This will mean difficult fiscal decisions at future Spending Reviews.

4. Increasing the size of the workforce so rapidly will likely require NHS wages to become more generous in real terms and – potentially – match or even exceed growth in wages in the rest of the economy. It will also likely require an increase in non-staffing inputs to healthcare (most obviously things such as drugs and equipment).

5. Under a central set of assumptions, the workforce plan 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), but higher than the 2.4% per year seen since 2009–10. In other words, returning to the NHS's long-run average funding growth rate could be enough to fund the workforce plan, but those increases would need to be delivered in a period when economy-wide productivity growth is expected to be lower than what it has been for much of the NHS's history.

6. 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 similar to the increase in UK health spending over the 15 years to 2008–09 (2.2% of GDP) and 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.

7. By the NHS's own estimates, the staffing increases contained in the plan will only be enough to meet NHS demand if productivity can be increased by between 1.5% and 2% per year: an extremely ambitious target well above what the NHS is estimated to have achieved in the past. The Office for National Statistics estimates that quality-adjusted productivity in the NHS increased by an average 0.8% per year between 1995–96 (when the data series starts) and 2019–20, and 1.2% per year between 2009–10 and 2019–20. While not perfectly comparable to the measure of labour productivity used in the workforce plan, this gives a sense of the scale of the ambition – particularly as, since the onset of the pandemic, measured productivity performance in the NHS has been even weaker.

8.1 Introduction
In January 2000, in what was subsequently dubbed ‘the most expensive breakfast in history', then Prime Minister Tony Blair announced on Sir David Frost's Sunday morning TV show that UK health spending would be increased to the European Union average. The then Chancellor Gordon Brown was rather displeased, and reportedly raged to the prime minister that ‘you’ve stolen my f***ing budget’ (Rawnsley, 2010).

In June, NHS England published its much-awaited long-term workforce plan (NHS England, 2023). For the first time, the plan sets out official estimates of how many staff the NHS will need in the future and proposes a range of actions and targets to achieve this. Its publication was welcomed across the political spectrum.

Many have discussed the strengths and weaknesses of the plan elsewhere (e.g. Black, 2023; Dixon, 2023; Murray, 2023; Palmer, 2023). But one of the less remarked-upon aspects of the plan is that it has probably stolen more than a decade’s worth of budgets, for funding the plan will require NHS spending in England to increase by around 2% of national income over 15 years, equivalent to around £50 billion in today’s terms. That will set the context and constraints in every Budget and Spending Review for at least the next decade.

Here, we do not seek to evaluate the merits of the plan, its modelling assumptions or its achievability. Instead, we start from the assumption that the plan will be implemented in full and consider the potential implications for the size of the NHS workforce and NHS budget in England. While the plan includes funding for new training places, it does not estimate nor provide for the longer-term increases in funding that will be required to cover the salaries – and other costs – of an expanded workforce.

The plan suggests the number of staff employed by the English NHS will increase 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, we estimate that NHS staffing numbers grew by around 1.1% per year between 2009–10 and 2019–20. Meeting the plan would almost certainly see the NHS account for a growing share of not just public sector employment but also the overall workforce. By 2036–37, we estimate that almost half (49%) of public sector workers in England will work for the NHS, compared with 38% in 2021–22 and 29% in 2009–10. Moreover, we estimate that one in eleven (9%) of all workers in England will work for the NHS, compared with one in seventeen (6%) in 2021–22 and 2009–10.

Such an expansion in the workforce has implications for the size of the NHS wage bill. First and most obviously, employing hundreds of thousands of additional people will increase staffing costs. But in addition, to attract and retain this many more workers, it seems likely that – at a minimum – NHS pay will need to keep pace with earnings in the wider economy. Taken together, we estimate that the workforce plan implies real-terms increases in the NHS wage bill of around 4.4% per year. Even if all other NHS spending (on non-staff items) were frozen in real terms for the next 15 years, this implies that the NHS budget would need to increase by around 2.3% per year, over and above inflation, to cover these higher staffing costs alone.

Read the full report HERE