NHS funding: our position

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Part of The King's Fund position

Last updated: 7 August 2019

The five-year financial settlement for the NHS provides much needed investment but is not enough to meet key waiting times standards and transform services for patients.

What we think

£112.9 billion of the NHS budget is spent on day-to-day running costs such as staff salaries and medicines, and £0.2 billion is spent on facilities and equipment.

After the most sustained funding squeeze in its history, the five-year funding deal for the NHS provides welcome relief and is generous compared to settlements for other public services. However, this deal does not extend to important areas of health spending, such as investment in buildings and equipment and training for staff, and leaves the NHS short of the resources it needs to both restore performance against key waiting times standards and transform services to deliver better care.

To fulfil the ambitions of the NHS long-term plan, the government also needs to ensure sufficient funding is available for other areas of public spending that are vital to improving health and wellbeing. This includes local authority budgets for social care and public health. A more coherent approach to health and social care funding that takes account of the system as a whole is needed.

Ultimately, funding levels for public services are a political choice. Politicians should be honest about the shortcomings in the availability and quality of services that will arise if health and social care budgets continue to be underfunded.

The context

Most funding for publicly-funded health services in England comes from central taxation, with overall NHS budgets set by national government. This model is fundamentally sound, being both efficient and equitable, and is strongly supported by the public. However, for decades, NHS funding has faced repeated cycles of 'boom and bust', with periods of chronic under-investment followed by intervals of rapid growth. A more strategic approach to funding decisions is needed, based on an independent assessment of demand for and costs of services instead of short-term approaches that create uncertainty and instability.

Although NHS budgets have been relatively protected compared to other areas of public spending, the health service has faced the most prolonged funding squeeze in its history over the last decade. This has led to trade-offs between different areas of health expenditure; spending on buildings, equipment, staff training and prevention have been deprioritised in order to pay for the day-to-day running of services. This is a false economy and stores up problems for the future. Other key areas of public spending that impact on health also continue to face severe financial constraints, particularly local authority budgets for public health and social care.

At the same time as enduring these financial constraints, the NHS has had to cope with severe workforce shortages and rising demand for health care. There are several reasons for rising demand: the population is growing; people are living longer, often with multiple long-term conditions; and technological advances mean that new treatments are available – these are often expensive, adding additional cost pressures.

Over the 70-year history of the NHS, spending has grown by 3.7 per cent each year on average.
Source: The King's Fund 2017

The combination of rising demand, workforce shortages and financial constraints has taken a toll on the health service: many NHS providers and commissioners have run significant deficits in their budgets in recent years; key waiting times standards are being missed all year round; and there is evidence that commissioners of care have been forced to limit access to services and that quality of care has been diminished in some services. These challenges have not gone unnoticed by the public; recent survey data suggests that a majority of the public think the NHS is underfunded, and polls consistently put the NHS as one of the top issues of public concern

In response to these ongoing pressures, in July 2018 the government announced a new five-year funding deal for the NHS, covering the period from 2019/20 to 2023/24. Under this deal, spending is set to rise by an average of 3.4 per cent each year in real terms. While this provides welcome stability for longer-term planning, funding levels under the settlement are still less than the historic average increase since the NHS was established of 3.7 per cent a year in real terms. In August 2019, the government announced a further £1 billion injection to NHS capital budgets in 2019/20, and said it would develop a health infrastructure plan to address the NHS’s longer-term need for new buildings, equipment and technology.

While the new NHS funding deal will ease current pressures, it is not enough to simultaneously restore performance against key waiting times standards and transform services to deliver better care.

Key spokespeople on NHS funding

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Siva Anandaciva

Chief Analyst

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Richard Murray

Chief Executive

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David Maguire

Senior Analyst

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