How is the NHS funded?
The vast majority of public1 NHS funding comes from general taxation and National Insurance contributions (NICs). A small proportion of funding (1.0 per cent of the total Department of Health and Social Care budget in 2021/22) comes from patient charges for services such as prescriptions and dental treatment.
- 1This excludes private income NHS public providers can earn, and Department of Health and Social Care spending on non-NHS providers.
What is the NHS budget?
Public funding for health services in England comes from the Department of Health and Social Care’s budget. The Department’s spending in 2022/23 was £181.7 billion. The vast majority of this spending (94.6 per cent, or £171.8 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 (£155.1 billion in 2022/23) 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 and the Office for Health Improvement and Disparities.
How has spending on the NHS changed over time?
Since 1955/56, spending on the NHS has increased by an average of 3.6 per cent per year in real terms, but this masks substantial variation over time. As most spending on health is allocated from central government, it depends on the decisions made by the government of the day.
Looking more recently, since the Conservative party has been in power (2015/16), spending has increased by 2.8 per cent a year on average in real terms. But it is important to remember that this masks more substantial annual increases or decreases caused by additional investment during the Covid-19 pandemic.
The government’s most recent budget included planned spending to 2024/25. Between 2022/23 and 2024/25, spending on health and social care is projected to increase by an average of 0.1 per cent a year in real terms.
Where does the money go?
In 2021/22, the largest area of day-to-day spending was on staff costs, equating to 40 per cent of 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 sector providers).
