Spring Budget 2023: what you need to know

What was announced?

• The Annual Allowance (AA) to increase from £40,000 to £60,000, from 6 April 2023. Individuals will continue to be able to carry forward unused Annual Allowances from the three previous tax years.  
• The adjusted income threshold for the Tapered Annual Allowance will also be increased from £240,000 to £260,000 from 6 April 2023.   
• The lifetime Allowance (LTA) to be removed from 6 April 2023 and will be abolished entirely abolished from April 2024. 
• 30 hours of free childcare has been extended to the parents of one- and two-year-olds.
• The energy price cap for households will continue for another three months.
• Devolved metro mayors will be given more authority to work with independent budgets subject to select committee oversight.
• The Medicines Healthcare and Regulation Authority MHRA will explore partnering with other agencies in the US, Europe and Japan and provide simple and rapid approval in the UK for products approved by these agencies.
• The government will make £10 million available via the suicide prevention voluntary, community and social enterprise (VCSE) grant in England over two years (2023/24 to 2024/25) to support people experiencing suicidal thoughts or approaching a mental health crisis.
• The government will embed tailored employment support within mental health and musculoskeletal (MSK) services in England. This will include expanding individual placement and support (IPS), which has a good evidence base for supports people with severe mental illness into employment.
• The Chancellor committed funding to reduce the number of economically inactive people and provide support to help those with long-term conditions such as mental health issues or MSK get back into work with £150 million being available over five years to increase employment advisers in health settings.
• Digital health innovations for mental health, musculoskeletal and cardiovascular conditions will receive £310 million of funding over five years. This will be used to digitise the NHS Health Check to identify and prevent more cases of cardiovascular disease. For mental health, they will modernise and digitise mental health services in England, providing wellness and clinical grade apps free at the point of use, pilot cutting-edge digital therapies, and digitise the NHS Talking Therapies programme.
• Devolved metro mayors will be given more authority to work with independent budgets subject to select committee oversight.

Analysis

Many of the challenges that were present at the Autumn Statement last year have remained, so this budget meets difficult circumstances. The Office for Budget Responsibility predicts inflation will remain high (albeit lower than previously forecast) at 4.1 per cent in 2023/24. [ ^* ] This is to the significant detriment of the public purse, and the impacts have caused their own public health emergency. 

Over a year on from the start of Russia’s invasion of Ukraine, we are still experiencing supply issues with certain products and materials, and high energy costs. Society is also still dealing with the fallout of the COVID-19 pandemic, and this is particularly apparent in the NHS. 

Across the public sector industrial action has caused significant disruption to services. In the NHS, this has hampered the ability to deal with backlogs that accumulated during the pandemic, which has knock on effects on economic productivity where people are too ill to work. In cases, it has also inevitably put lives at risk. 

Industrial action across the public sector is largely down to pay and conditions, but with such significant workforce shortages in the NHS, as vacancies currently sit at around 124,000, many striking staff members in the NHS cited concerns over the quality of care that they were able to provide as a reason for walking out. 

NHS workforce plan

Therefore, we are disappointed that the much-anticipated NHS workforce plan has not been published alongside the Budget. While the government should be credited with committing to publish a workforce plan, the continued delays will come at a cost. Staff shortages are a key reason behind the industrial dispute and the imperative to offer hope to staff that workforce numbers will increase. They will be left discouraged today. Health leaders continue to be put in an unenviable position whereby staff shortages will worsen as stagnating pay lessens the relative value of a healthcare career. We will continue to push for its publication. 

Health and prosperity

The continued deferment of a workforce plan is not solely stifling physical services; it holds wider implications for the economy and our productivity. As illustrated in our recent report, an NHS that is appropriately staffed will directly increase local productivity through more people being employed in good work, enabling the NHS to collectively widen access to healthcare and reduce waiting lists. This in turn ensures that more people can return to the labour market and contribute to the economy, especially in areas of high deprivation, which have higher unemployment rates. This cyclical benefit between the workforce, the health of the population and the prosperity of local economies will not be realised without a clear workforce plan.

Pensions

The abolition of the pension lifetime allowance was a significant surprise in the budget and will help reassure senior doctors concerned about large pensions related tax bills. The increase in the annual allowance will, according to the Chancellor, mean that 80 per cent of doctors will no longer receive a pensions tax bill. Our position has been that annual allowance charges should not be applied to the public sector, but this is still welcome news, particularly to NHS Employers who have campaigned for these changes. Similarly, an increase in the free childcare allowance will likely encourage more healthcare staff to return to work which can only be welcomed. 

Levelling up and devolution

Levelling up and devolution continue to feature and the announcements should underpin work on the fourth integrated care system (ICS) purpose of helping the NHS support broader social and economic development. In particular, system leaders should seek to understand the potential for health to influence the new innovation zones, levelling-up partnerships and regeneration projects.

The newly agreed devolution deals for the West Midlands and Greater Manchester include single funding settlements, bringing together disconnected grants and pots which will be of interest for ICS leaders in these areas. We are working with the Local Government Association throughout 2023 to explore the alignments between health and devolution and to support members in this area. 

Digital and mental health

We are pleased to see additional investment in modernising and digitising mental health services in England, such as digitising the NHS Talking Therapies programme. This will help a large number of people with mental health problems access mental health services and will help mental health services reduce their backlog. However, this cannot be seen as a replacement for face-to-face services, as digital services will not be suitable for everyone. 

Being in employment can be good for your mental health, so a commitment to expand individual placement support (IPS) to help more people with serious mental illness who are able to get back into work, is very welcome. This policy initiative is linked to the forthcoming Major Conditions Strategy, which has been a ministerial priority for some time.

Capital

Our capital campaign over the past year has highlighted how decades of underinvestment in capital infrastructure mean our service is not as productive as it needs to be as we age and demand more complex treatments. Despite this, the UK’s capital investment has regularly been less than half OECD peers over the past decade. We are disappointed that the funding amount isn’t higher than what was forecast in the autumn, however, an improving inflation picture for 2023/24 should increase the real value of the capital settlement. 

Social care

Health leaders want a fully funded and functional care system that helps people to live independently with dignity and in safety, while also reducing pressures on emergency departments and mental health units. Today’s Budget offers little above and beyond what was announced in the autumn. What we need is a broader set of reforms, including bringing forward planned Dilnot reforms. The government should also set a minimum wage for care workers higher than the regular level to boost desperately needed staffing numbers and morale across social care.

Medicines and technologies

Finally, we welcome the announcement of reforms to the MHRA from 2024. These reforms should allow faster regulatory sign off for medicines and technologies, ultimately meaning patients in the UK will get faster access to innovative treatments.

How we will be supporting members

As part of our financial influencing work, we will continue to engage with our members on where this budget update leaves local services and what needs to happen next. Please contact Jonathan Barron with your feedback.

Our ICS Network finance forum meets bi-monthly to explore key finance policy issues which will shape the future of the NHS and to engage with national policy stakeholders. The forum is open to ICS members with an interest in finance, not just to specific role holders. If you would like to get involved or find out more, please contact Ed Jones.