Budget 2021

A summary of the government's 2021 Budget and the implications for the health and care sector.

3 March 2021

The government has published its spring 2021 Budget, summarising the state of the economy and forecasting the economic landscape, as well as outlining urgent additional spending needs. The Comprehensive Spending Review (CSR), which will provide further detail on longer-term system planning and restructuring, will follow later in the year.

This briefing provides details on key areas of expenditure announced by the Chancellor, our view of where this leaves the health and care system, and the longer-term investment that will be needed in the CSR later this year. Our assessment is informed by engagement with our members, as well as detailed analysis undertaken by the Health Foundation that we contributed to last year. The research and our subsequent Spending Review submission highlighted pressures related to the COVID-19 pandemic and investment required to enable recovery.

Key points

  • The Budget does little to build on the urgent funding allocated to the NHS in the November Spending Review, which we don’t believe was sufficient based on the scale of the recovery challenge and the analysis undertaken by the Health Foundation. Also, it misses the opportunity to address the gaping holes in the provision of social care, as well as for staff training and education, primary care, public health and capital funding.
  • The extra £1.65 billion announced for the COVID-19 vaccination programme will be essential to ensure its roll-out in England continues to be a success. This builds on the £6 billion outlined in the Spending Review, but Health Foundation data suggests up to £27 billion may be needed in 2021/22 to support both the vaccination and Test and Trace programmes.
  • The government’s commitment to extending Test and Trace one-off support payments of £500 to allow individuals to isolate in England without losing income until the summer is a welcomed announcement. However, to ensure that we can control the spread of COVID-19 effectively into the future, we may need to see this extended. We support the extension of this programme to parents whose child has COVID-19 and need to look after them at home, and the additional £20 million per month for discretionary payments, which will contribute to higher isolation rates.
  • The continued suspension of tariffs on medical products used to tackle coronavirus such as COVID-19 testing kits, medicine and personal protective equipment (PPE), is welcomed. We hope to see long-term cost support for these critical imports in the upcoming CSR.
  • The pensions lifetime allowance will be frozen until April 2026, which could have a significant impact on the NHS's workforce, including the number of shifts some staff feel able to take or when they choose to retire.
  • NHS England’s overall budget for 2021-22 will be cut by £9 billion due to the Treasury’s plan to reduce NHS spending on the pandemic from £18 billion this year to £3 billion in 2021/22.
  • The announced additional £1 billion from the Towns Fund for a further 45 Town Deals across England are welcomed, as is the newly launched Levelling Up Fund. Such funding sources are crucial for the NHS and wider population health.
  • The additional £10 million for charitable projects that support the mental health of veterans will help charities, who have seen their incomes reduce due to the pandemic, to continue to provide vital mental health support to veterans and their families.
  • The announcement of an unsponsored, points-based visa to attract highly-skilled migrants in the fields of academia, science, research and technology is welcome. The support offered to small employers on how to use the new immigration system will be especially useful in smaller NHS organisations including primary care. However, given that care workers other than senior care workers earning over £20,000 are excluded, it does not adequately address the key issue of needing to reform the post-Brexit system to allow for international recruitment in the social care sector.
  • Workforce recovery is a key element of overall recovery. The increase of apprenticeship incentive payments to £3,000 for new apprenticeship hires of any age between 1 April and 30 September 2021, and additional funding of £126 million for 40,000 more traineeships for 16–24-year-olds in England, are welcomed. These measures will enable the NHS to further increase the number of new apprenticeship and traineeship starts into the workforce, as part of existing workforce supply strategies or developing anchor institution plans to improve population health and support local economic recovery. The need to increase the workforce beyond this is well rehearsed and articulated in our work with the Health Foundation.

Vaccination programme

Over 20 million people in the UK have received a first dose of a COVID-19 vaccine. The continued success of the vaccination programme will be crucial to prevent further spread of the virus and subsequent pressures on the NHS. We therefore welcome the outlined measures to continue to support the vaccination campaign. Including the following:

  • An extra £1.65 billion cash injection to ensure the COVID-19 vaccination roll-out in England continues to be a success. The devolved administrations are receiving additional funding through the Barnett formula in the usual way. We await further detail on exactly what this funding will be for, and what the implications will be for frontline delivery.
  • £28 million to increase the UK’s capacity for vaccine testing, support clinical trials and improve the UK’s ability to rapidly acquire samples of new variants of COVID-19.
  • £22 million for a world-leading study to test the effectiveness of combinations of different COVID-19 vaccines. This will also fund the world’s first study assessing the effectiveness of a third dose of vaccine to improve the response against current and future variants of COVID-19.
  • A further £5 million on top of a previous £9 million investment in clinical-scale mRNA manufacturing, to create a ‘library’ of vaccines that will work against COVID-19 variants for possible rapid response deployment.

Reflections on remaining CSR funding

While the additional support given to the national vaccination programme is welcomed, the Budget included some glaring omissions, leaving shortfalls in the amount of money the Health Foundation projects will be needed for the NHS to recover from the pandemic. These include the following:

  • Elective backlog - The £3 billion funding allocated in the Spending Review in November to support the NHS recovery in England is not enough to achieve recovery, which demands meeting new or exacerbated health needs. In order to tackle the elective backlog, address rising rates of mental ill-health, support primary care to manage increased patient activity and help ease other pressures resulting from coronavirus, Health Foundation modelling tells us that £7 billion of additional funding is needed in the upcoming CSR if the NHS is to have a chance at recovery.
  • PPE - No additional funds for PPE on top of the £2.1 billion pledged in the Spending Review. Moreover, the temporary zero rate of VAT on PPE equipment to support affected sectors ended last year and will not be carried forward.
  • Mental health funding - While our members welcome the additional £500 million for mental health services that was confirmed last November for 2021/22, we are concerned this could leave a deficit of up to £900 million based on the Health Foundation’s projections.
  • Workforce education and training - In the Spending Review, £260 million was allocated for staff training and education. Although the apprenticeships outlined in the Budget are a positive step, NHS-specific initiatives are needed to address the long-standing workforce shortages across the NHS. There remains a deficit of between £320 million and £640 million based on Health Foundation modelling.
  • Capital funding – In the Spending Review, £9.4 billion was allocated for new hospitals and other health infrastructure, largely in the acute sector. Based on Health Foundation modelling, there is a shortfall of £1.1 billion. However, the Budget omitted additional capital spending, which will be crucial for continuing effective infection control measures. There is also an urgent need to invest in our primary care, community and mental health estate. 

NHS Confederation viewpoint

Despite the Chancellor’s promise to give the NHS ‘whatever resources’ it needed to get through the crisis, the 2021 Budget fails to acknowledge the huge toll the past year has taken on our key public services and its workforce. Perhaps the biggest omission was the long-needed investments in the social care sector.

The omission of investment needed to tackle the gaping holes in provision in capital; in public health; in workforce training and education spending; primary and community care; in independent sector support and in mental health provision, will need to be addressed in the CSR if the health and care system is to have a chance at recovery.

While an additional £3 billion of funding to tackle the elective care backlog and wider pressures was announced in the autumn Spending Review, this fell far short of the £10 billion investment in the NHS recommended by the Health Foundation, and supported by our members, to deal with the impact of pressures and fall out from COVID-19 on our services.

The outlined interventions to support jobs and remove barriers to self-isolation are welcomed. We support the measures to encourage apprenticeships and traineeships. However, a comprehensive and well-funded workforce strategy and additional funding for staff mental health and wellbeing will be crucial if the health and social care system is to have a chance at recovery. The Towns Fund and newly established Levelling Up Fund are also a welcomed development. The NHS Confederation will continue to ensure NHS organisations and integrated care systems can play a role in the local decision-making and project development and will publish briefings as and when appropriate.

This Budget announcement came at a time of ongoing economic uncertainty. As soon as the economic outlook is more certain, the government should re-examine the current funding settlement the NHS is due to receive up until 2023/24. This was never enough to meet rising demand and the situation has been exacerbated by the pandemic. It will also be important to continually re-evaluate where spending should be prioritised, with an increasing need to bolster primary, community and mental health services as we look beyond the emergency response to coronavirus and towards what will be a long recovery.

The government will need to consider some extra COVID-19-specific costs that will be necessary beyond March 2021. There must be a recognition of the impact of COVID-19 infection for the longer term: the creation of specialist ‘Long Covid’ services and expansion of community and primary care-based rehabilitation will need significant investment and will draw staff in the short term from other services.

In planning for the longer term, we made clear to the Prime Minister that the government will need investment in public health, population health management and reducing the long-standing health inequalities that we know have contributed to the levels of infection, harm and death due to COVID-19 in our poorer and ethnic minority communities. They will need a plan for the resilience of NHS services and other interventions such as test, trace and isolate and primary-care-delivered vaccination programmes in the event of another pandemic.