The NHS budget and how it has changed

How is the NHS funded?

The vast majority of public NHS funding comes from general taxation and National Insurance contributions. A small proportion of funding (1% of the total Department of Health and Social Care budget in 2023/24) comes from patient charges for services such as prescriptions and dental treatment. The level of NHS funding in a given year is set by central government through the Spending Review process and annual Budgets.

What is the NHS budget?

Public funding for health services in England comes from Department of Health and Social Care’s budget. The Department’s spending in 2023/24 was £188.5 billion. The vast majority of this spending (94.4%, or £177.9 billion) was on day-to-day items such as staff salaries and medicines. The remainder was largely capital expenditure on long-term fixed assets such as new buildings or equipment.

Of the day-to-day spending, most (£171 billion in 2023/24) was allocated to NHS England for spending on health services. The remainder was allocated to central budgets of the Department of Health and Social Care and its other arms-length bodies such as the UK Health Security Agency.

How has spending on the health services changed over time?

Since 1955/56, spending on health services has increased by an average of 3.7% per year in real terms, but this masks substantial variation over time depending on the decisions made by the government of the day.

Looking more recently, between 2015/16 and 2023/24 spending increased by 2.3% a year on average in real terms – below average growth rates. But it is important to remember that this masks more substantial annual increases and decreases caused by additional investment during the Covid-19 pandemic.

The government’s 2024 Autumn Budget included planned spending to 2025/26. Spending is expected to rise in 2025/26 at roughly average historical levels. The graph below shows Department of Health and Social Care spending, to allow us to more easily disaggregate specific allocated Covid-19 funding but NHS spending follows a similar pattern.

Where does the money go?

The largest area of NHS day-to-day spending is typically staff costs, equating to 49% of day-to-day expenditure. Other areas of significant spending include primary care (general practice, dentistry, etc), procurement (supplies and services to deliver health care) and non-NHS health care (independent, local authority or voluntary, community or social enterprise sector providers).