Why does the NHS have a productivity problem?

Pressure to fix the “productivity puzzle” in England’s health service is greater than ever after billions of pounds in additional funding for the NHS were allocated in the Budget.

Despite resources increasing by 20 per cent over the past five years, the number of patients treated by the service had risen by just 3 per cent, according to a report on the health service by Lord Ara Darzi.

Experts say outdated infrastructure, an increasing reliance on less experienced staff and under-resourced primary care are all hampering the health service as it battles to take on more patients than before the Covid-19 pandemic. 

On Wednesday, the health secretary Wes Streeting will set out the first of a series of reforms designed to improve NHS performance and productivity.

Underperforming hospitals will be publicly shamed in newly created league tables, and senior health managers who fail to deliver will be fired, he will say in a speech at the annual NHS providers conference.

Although productivity remains below pre-pandemic levels, a report published on Tuesday by the Institute for Fiscal Studies think-tank will come as a welcome boost to the sector, as it concluded hospital productivity has started to rebound over the past year.

The number of NHS clinical staff has risen substantially since 2019, far outpacing the number of tests and appointments given to patients, official data shows.

However, over the past year this trend has reversed with the number of elective admissions, outpatient appointments and diagnostic tests rising faster than workforce numbers.

While staff numbers have risen over the past year, the amount of treatment provided in hospitals has increased at a faster pace, “suggesting that those staff are being put to good use”, he said.

Olly Harvey-Rich, research economist at IFS and an author of the report, said that while productivity had fallen substantially since the start of the pandemic, with services hit by persistent staff absences, “that trend may now at last be reversing”.

However, he cautioned that while this was undoubtedly positive news for health leaders and politicians, “we should remember that NHS productivity is still below where it was pre-pandemic and will require a further period of improvement” before the hit is “fully unwound”.

Chancellor Rachel Reeves’ injection of a £22.6bn rise in the day-to-day budget of the NHS over two years, and a £3.1bn increase in capital spending, were delivered with the understanding that they would “enable the NHS to deliver 2 per cent productivity growth next year”.

“One of the key things is to look at where the money has been going,” said Charlotte Wickens, a policy adviser at the King’s Fund think-tank and expert on NHS productivity. “It’s about where it hasn’t been spent as much as where it has been.”

Spending on hospital services has increased as a proportion of total NHS expenditure in recent years, while the proportion spent on primary care and community health services has fallen.

Hospital trusts have recorded funding growth of 27 per cent since 2016-17, according to the latest NHS accounts, compared with 14 per cent in community trusts. 

A lack of social care provision has resulted in people spending longer in hospital beds when they could be discharged, said Wickens. The Darzi report found that 13 per cent of NHS beds were occupied by those waiting for social care support or care in the community.

“When we think of primary care, services haven’t had the same increases in the number of GPs or funding, and this has a knock-on impact on hospitals, who are seeing people in A&E when they can’t be seen by their GP,” Wickens said. 

“Social care capacity has a real impact on how flow works in hospitals, so despite the rising budgets for hospitals, they are really being impacted by factors outside that budgetary control.”

Crumbling buildings and equipment are also holding back staff productivity, according to Anita Charlesworth, director of research at the Health Foundation think-tank. 

“You have staff working in facilities and with kit which is not fit for purpose,” said Charlesworth. “Even if those people are highly motivated and well trained, they are operating with one hand tied behind their back.”

Darzi found England had spent almost £37bn less than peer countries on health assets and infrastructure since the 2010s, forcing the health service to raid capital budgets to manage day-to-day spending. 

Crumbling buildings meant services were disrupted at 13 hospitals a day in 2022-23, his report found.

The bill to repair NHS buildings and facilities rocketed to almost £14bn last month, compared with £11.6bn in the 2022-23 financial year, including £2.74bn worth of “high-risk” repairs.

“It puts the absolute onus on the NHS to target that capital investment on the things that will really unlock productivity gain and to spend that money well,” Charlesworth said. 

She added that the NHS “has not always done well with the capital it has been given and that would be simply unforgivable now”. 

While the NHS workforce has grown, a large share are joining with only a few years of experience. Experts say junior staff are more likely to be cautious before making a diagnosis and carry out more tests, which can slow down patient care.

The number of nurses, midwives and nursing associates who joined the Nursing and Midwifery Council’s official register under five years ago increased almost 70 per cent between March 2019 and March 2024, compared with a 6 per cent rise in more experienced staff.

“Although the size of the workforce is expanding, we are seeing an increase in less experienced staff, and more experienced staff who worked through Covid are now retiring,” said Wickens.

“It does take a while for those more junior staff to become more productive, simply because they are learning at the same time as working.”