Is the UK spending more than we thought on health care (and much less on social care)?

New international accounting conventions suggest that the United Kingdom is spending much more on health care, both publicly and privately, than previously thought. The latest spending figures for 2014 published by the Office for National Statistics (ONS), adjusted to comply with the Organisation for Economic Co-operation and Development’s (OECD) system for health accounts,have added around £21 billion (€27 billion; $30 billion) to health spending – an overnight leap of 13 per cent from the previous estimate for 2014. It also means that total public and private spending on health jumps from 8.7 per cent of gross domestic product (GDP) to 9.9 per cent. Can this be true, and what does it mean?

What it doesn’t mean is any material change in actual spending. The budget for the NHS, for example, has not suddenly increased. But it does have implications for how UK health (and social) care spending compares with that in other countries and raises the tricky issue of the boundary between health and social care (and even perhaps whether there should be one at all).

Applying the new accounting rules has meant that around £8.7 billion of spending previously counted as health spend is now not counted but that £29.4 billion previously counted elsewhere in the national accounts (and in part as private spending) is now considered as spending on health care. The net effect is a £20.7 billion increase in health spending. As Figure 1 shows, among the 11 changes in accounting (including a transfer of spending within out-of-pocket spend that in effect cancels out), the big movements are a fall in capital spending (£5.6 billion) and the addition of spending on privately funded long-term care (£9.5 billion) and publicly funded health-related social care (£13.5 billion).

The upshot of these changes is that, excluding capital spending (0.3 per cent of GDP), the UK has added 1.5 percentage points of GDP to total current spending to health care. This boosts spending from 8.4 per cent to 9.9 per cent of GDP in 2014. Roughly, allowing for some rounding in the figures, this is equivalent to public spending increasing from 6.9 per cent to 7.9 per cent and private spending from 1.5 per cent to 2 per cent (see Figure 2).

The bulk of these changes are down to reclassifying a big chunk of publicly funded social care spend as health care spending. This means that the increase in the UK’s combined public spending on health and social care under the new accounting methods remains largely unchanged, with the main addition being the inclusion of the Carer’s Allowance, worth £2.4 billion in 2014.

Although the new health accounts now include spending on local authority nursing and residential care as well as other health-related aspects of social care spending, at the level of individuals it can be difficult to make the distinction between these sorts of consumption. An ageing population and changing patterns of disease are making it much harder to demarcate health from social care needs, as the Barker Commission pointed out. Should we move to simply considering health and social care as inseparable—that is, as ‘care’?

The new health accounts are likely to change the UK’s position in international health spending rankings (see Figure 3). Several other countries that are either already using the new accounting framework or have piloted the new system report little or no change in their health spending. Some, notably Sweden, report a big jump – from 8.5 per cent to 10.6 per cent of GDP between 2010 and 2011 – largely as a result of the accounting changes. The full extent of the new system of accounts for other countries will be known later this year when the OECD publishes the latest data on spending.

International health spending comparisons (and arguments for increased UK health spending based on its relatively low ranking) were never straightforward. However, moves to a more commensurate set of international data should improve comparability. Meanwhile, back home, and away from the ins and outs of international health accounting conventions, short and medium term financial pressures on public health services remain the reality.

This blog is also published on The BMJ.

• Read more about the current financial pressures in our latest Quarterly monitoring report.