Conservative party plans at the 2019 general election implied
that the day-to-day health budget in England would rise by 3.3%
per year in real (inflation-adjusted) terms over this parliament.
The government's latest plans imply average growth of 2.7% per
year, with additional cash funding for the health service more
than offset by higher inflation.
In other words, despite a pandemic, record waiting lists
and growing rates of ill health, real-terms health spending has
risen less quickly than was planned five years ago. This
breaks the habit of a lifetime: over the past 40 years, the NHS
budget has almost always grown more quickly than originally
planned. This parliament is the exception.
Health spending has grown more slowly than originally planned,
and more slowly than the long-run average, but because
economic growth has been so feeble, health
spending as a share of GDP has grown more quickly than
usual. Put differently, because our national income has
grown so little, we have had to take more of it just to secure
below-average rates of growth in the health budget. Weak growth
makes everything harder.
The latest plans imply no real-terms growth for the NHS
England budget between 2023–24 and 2024–25. There are
currently no published plans for health spending beyond that
point. Whoever takes office after the next election won't have
long to decide budgets for the NHS and other government
departments for the next fiscal year (2025–26). Given the
well-documented pressures on the NHS, holding spending flat in
real terms is unlikely to be a sustainable long-term strategy. If
we disregard the recent years when exceptional pandemic funding
was withdrawn, the last time that the health budget failed to
grow for two consecutive years was in the 1950s. The NHS England
workforce plan – endorsed by both main UK parties – implies a
real-terms funding growth of around 3.6% per year if it is to be
achieved. That is a more realistic benchmark.
These are among the findings of a new pre-election IFS briefing,
funded by the abrdn Financial Fairness Trust and the Nuffield
Foundation, which examines the past and future of UK health
spending.
Max Warner, a Research Economist at IFS and an author of
the report, said:
“Whichever party takes office after the next election won't have
long to set out departmental budgets for the next fiscal year,
and the choice of how much to give to the Department of Health
and Social Care – which now represents more than 40% of total
day-to-day departmental spending – will effectively dominate
everything else. Spending on the health service will – absent a
big reduction in the role of the NHS, or further deterioration in
quality – have to rise in real terms to meet the pressures the
service faces and deliver the workforce plan which both the main
UK parties have signed up to. But the sheer size of the health
budget means that delivering funding increases at anything like
the historical average would require cuts elsewhere, even before
accounting for recent promises on defence spending. Neither the
Conservative party nor Labour party have been keen to set out
spending plans. But the next government will have to confront
this reality – and fast.”
Mark Franks, Director of Welfare at the Nuffield
Foundation, said:
“Increasing demands on the NHS, driven by demographic change and
availability of new treatments, mean that it accounts for a large
and growing chunk of public spending. This raises fiscal
challenges that the next government will have no choice but to
grapple with. However, we should not think about it purely in
terms of cost to the public purse, because a well-functioning NHS
is vital to the wellbeing of the population, including its most
vulnerable members. And as the NHS expands to account for a
greater share of government spending and employment, it will take
on greater macroeconomic significance.”
ENDS
Notes to Editor
The past and future of UK health spending is an IFS
report by George Stoye, Max Warner and Ben Zaranko.
