The NHS will require substantially higher levels of funding over next 20 years unless worrying trends in productivity and unhealthy lifestyles are tackled

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The most comprehensive assessment to date of the unprecedented levels of funding invested by the government in the NHS over the past five years is published today by The King's Fund.

Five years on from his seminal report for the Treasury which paved the way for the 50 per cent real terms increases in NHS spending since 2002, Sir Derek Wanless's latest review for The King's Fund, Our Future Health Secured? A review of NHS funding and performance examines how the extra money has been spent; what the NHS has achieved; whether the pace and direction of government reform has delivered value for money; and considers what lessons can be learned for the future.

The review concludes that the increases in funding have delivered notable improvements – more staff and equipment; improved infrastructure; significantly reduced waiting times and better access to care; and improved care in coronary heart disease, cancer, stroke and mental health.

However, it finds the additional funding has not produced the improvements in productivity assumed in the original 2002 review – costs of providing hospital and other services have increased. Hospital activity has increased, but the biggest increase has been in emergency, rather than elective, admissions which raises doubts about how demand is being managed across the health service. While the problems and delays that have beset the National Programme for IT (NPfIT) also have the potential seriously to undermine future productivity gains.

And, more crucially, progress on lifestyle behaviours has been slower than predicted. In particular, dramatic rises in adult and child obesity are of great concern with the UK now with much higher levels than even the least ambitious predictions of the 2002 review.

Sir Derek Wanless said: 'The political decision the government took at the turn of the century to invest so heavily in the NHS after decades of under investment marked a once in a lifetime opportunity to improve the health of the nation. The extra resources, accompanied by fundamental reform, have undoubtedly improved patient care over the past five years. This is to be commended.

'But what is equally clear from this review is that we are not on course to deliver the sustainable and world class health care system, and ultimately the healthier nation, that we all desire. Without significant improvements in NHS productivity, and much greater efforts to tackle obesity in particular, even higher levels of funding will be needed over the next two decades to deliver the comprehensive, high-quality services envisaged by my original review. Such an expensive service could undermine the current widespread political support for the NHS and raise questions about its long-term future.'

Sir Derek added: 'Despite these concerns, we conclude that the broad direction of government health policy is the right one, although it is still too early to evaluate its full impact, in part because of the uncertain introduction of policies and structural changes without adequate preparation. The radical structural changes to the NHS since 2002 have been costly, not just financially but in terms of disruption, loss of experienced staff and changes in working relationships both within the NHS and with other organisations. But there is no need to change tack – instead, we need quickly to find ways of identifying and tackling policy weaknesses, focus on increasing productivity and, the biggest challenge which is shared by individuals as well as government, is to tackle unhealthy behaviours.'

The report revisits the three possible spending 'scenarios' for health care up to 2022/3 outlined in Sir Derek's 2002 review – solid progress, slow uptake and fully engaged. Each reflected different assumptions about the effectiveness of NHS performance and the health status of the nation. If the NHS were to meet the most ambitious, fully-engaged scenario, where services are significantly more productive and individuals take greater responsibility for their own health, then health spending would need to increase from an estimated £68 billion in 2002/3 to £154 billion by 2022/3 (at 2002/3 prices). However, if the NHS was on course to meet the slow uptake scenario, the least satisfactory and most expensive of the three, then spending would rise to £184 billion – real growth of 171 per cent from 2002’s starting position. The funding increase was at the same level for all three scenarios for the first five years and broadly matches the actual increase since 2002.

Sir Derek's latest review examines NHS performance since 2002 against those three scenarios. The evidence suggests that while significant progress has been made in several key areas, the overall health of the nation is still a long way short of the fully engaged scenario and is on a path between slow uptake and solid progress.

The review warns that if the NHS receives a financial settlement much closer to its historical long-term average of around 3 per cent in the upcoming comprehensive spending review (CSR), then by 2010/11 (the end of the next CSR period), the NHS would fall short of the slow uptake, solid progress and fully engaged spending paths by around £7.2 billion, £9.2 billion and £15.2 billion respectively (all at 2002/3 prices). This would place the UK near the bottom end of estimated average (weighted) EU health care spend as a proportion of GDP (based on total health care spending – both public and private – for the 15 EU countries in 2000).

Sir Derek added: 'But the issue is not solely about how much we spend. More importantly, it is how much value we get from our money and our review makes recommendations about what needs to be done if we are to achieve more.'

King's Fund Chief Executive Niall Dickson said: 'The timing of this report is hugely significant as the big injections of extra funds into the NHS will certainly slow from 2008, making it even more important to determine how the additional funding has been used, what it has achieved and, critically, what lessons we can learn for the future. The government pledged to catch up with other EU countries after decades of under-investment – this has been achieved. But if the NHS is not only to catch up but keep up with other European health care systems then we need to find new ways of making the health system more productive with better clinical outcomes – the alternative is to face the prospect of a second rate service.'

He added: 'It's clear that if we are going to sustain a system that is comprehensive, tax funded and free at the point of need we will need to be clear about what we want to achieve for this massive investment and be able to demonstrate that high quality, efficient services are being delivered.

'This report does suggest that there is a case for a rate of growth above four per cent in the forthcoming Comprehensive Spending Review but even with that level of continued investment there would be a need for improved productivity and efficiency. Without this there will inevitably be questions raised about the long-term viability of our health service.'

Read the report: Our Future Health Secured? A review of NHS funding and performance

Notes to editors

  1. For further information or interviews, please contact the King’s Fund press office on 020 7307 2585, 020 7307 2632 or 020 7307 2581. An ISDN line is available for interviews on 020 7637 0185.
  2. Our Future Health Secured? A review of NHS funding and performance is available on The King's Fund website.
  3. Sir Derek Wanless has prepared two significant reports for the government on the NHS, Securing Our Future Health: Taking a Long-Term View (2002), and Securing Good Health for the Whole Population (2004). Also, in March 2006 his report on social care - Securing Good Care for Older People: Taking a long-term view – was published by the King’s Fund. Sir Derek was assisted on the review by King’s Fund Chief Economist John Appleby; King’s Fund Senior Associate Anthony Harrison, and Darshan Patel, who was seconded to work on the review from the British Dental Association, where he is an economist.
  4. The scenarios outlined by Sir Derek in his 2002 review reveal three different potential spending paths for the NHS over the 20 years to 2022/23. Fully engaged, the most ambitious and resource-efficient scenario, showed NHS spending rising from an estimated £68 billion in 2002/3 to £154 billion (at 2002/3 prices) by 2022/3, representing real growth of 126 per cent; slow uptake, the least satisfactory and most expensive scenario, had spending rising to £184 billion – real growth of 171 per cent; while solid progress, a scenario of steady improvement, projected a rise to £161 billion – real growth of 137 per cent.
  5. The King’s Fund is an independent charitable foundation working for better health, especially in London. We carry out research, policy analysis and development activities, working on our own, in partnerships, and through funding. We are a major resource to people working in health and social care, offering leadership development programmes; seminars and workshops; publications; information and library services; and conference and meeting facilities.