Closing the NHS blackhole

If NHS funding only rises in line with inflation then by 2020/21 there will be a £30 billion black hole between the funding provided for the NHS and the funding that is needed to keep the NHS providing the current level of service without a loss in quality.

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Based on the level of NHS funding planned by the government, from 2015/16 to 2020/21 spending on the NHS is due to rise by an average per year of just 0.9%.  This growth rate of 0.9% is below the historical average for the UK of 3.7% per year.  The increase in spending outlined by the government will see the NHS budget increase by £4.5 billion in real terms. Nearly half this amount is earmarked for 2016/17, leaving the remaining increase spread over the next four years. This increase in spending will mean that as a percentage of GDP spending on the NHS will fall from 7.3% in 2014/15 to 6.7% in 2020/21.

There are alternative funding scenarios for the NHS that get closer to filling the funding black hole for the NHS to 2020/21:

 

  • An increase in NHS spending to match the UK’s growth rate  —  the UK economy is forecast to rise by about 15.2% in real terms by 2020/21, if NHS spending rose at an equivalent level then NHS spending in 2020/21 would reach £158 billion at today’s prices. This would mean that NHS spending would be £16 billion more than the government’s current plans. This would go a long way to filling the £30 billion black hole in funding.

 

  • An increase in NHS spending to match other OECD countries (excluding the USA)  —  to achieve this the UK would have to spend an additional 15% or £21 billion more on NHS funding by 2020/21, which would take total NHS spending to £163 billion in 2020/21.

 

  • An increase in NHS spending to match the UK’s EU neighbours  —  if the UK increased NHS funding by an additional 30% by 2020/21 or £43 billion in real terms more than current spending plans the UK would go someway to catch up with the level its EU neighbours are managing to spend on healthcare in terms of proportion of GDP. This would take total NHS spending to £185 billion by 2020/21. Data from the OECD, show that in 2013 the UK spent 8.5% of its GDP on public and private health care, which meant that the UK was 13th out of the original 15 countries of the EU. The average of 14 EU countries (excluding the UK) in 2013 was 10.1%.