Does the NHS need more money?

Big election questions
Leo Ewbank

Ahead of the general election on 8 June, we examine the big issues around health and care.

What’s the issue?

In recent years, NHS spending has been protected while other budgets, such as those for local government services and policing, have been subject to significant cuts. Despite this, health services are facing unprecedented financial and operational pressures, with many NHS organisations in deficit and performance against key standards deteriorating.

What’s behind this?

Demand for health care is rising for several reasons: the population is increasing; more people are living longer, often with multiple long-term conditions; and technological advances mean that new treatments are available. As a result, health services are treating more people than ever before. For example, between 2003/4 and 2015/16, the number of admissions to hospital increased by 3.6 per cent a year.

At the same time, the NHS is enduring the most prolonged funding squeeze in its history. Between 2015/16 and 2020/21 funding increases will average 0.7 per cent a year in real terms, compared to the long-term average of approximately 4.0 per cent a year since the NHS was established.

The mismatch between increases in activity and in funding is creating significant challenges. All areas of the NHS are affected, with acute hospitals, general practice, mental health and community services all under pressure. In December 2016, NHS Improvement forecast that NHS trusts would end 2016/17 with a potential deficit in the range of £750–£850 million, despite the injection of £1.8 billion of sustainability and transformation funding. At the same time, performance against key waiting time targets is deteriorating, there is evidence that access to some health services is being rationed and quality of care in some services is being diluted.

In the 2015 Spending Review, the government announced an increase in NHS England’s budget of £10 billion a year between 2014/15 and 2020/21, arguing that it had given the NHS the funding it asked for to implement the NHS five year forward view. The £10 billion is made up of additional resources provided to the Department of Health and funds released through cuts in unprotected areas of the Department’s budget. It also includes £2 billion of extra funding that had already been committed for 2015/16.

These unprotected areas include education and training, capital spending and investment in public health, which are now coming under pressure with cuts being made to public health services and an increasing backlog of hospital maintenance costs. Health spending – as defined by the Department of Health’s budget – will increase by around only £4.6 billion in real terms between 2015/16 and 2020/21. NHS spending per person is projected to fall in real terms as population growth outpaces spending increases.

The King’s Fund view

While there is still significant scope to improve productivity, the NHS can no longer maintain quality of care and meet performance standards within its current budget. In the short term, the incoming government will need to find additional funding if the NHS is to be able to deliver the current range of services to existing standards of care. In the long term, NHS spending should increase as a proportion of GDP to bring it more in line with countries such as Germany, France and the Netherlands. As the Barker Commission argued, this is affordable if hard choices are made about taxation and public spending.

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