1. Healthcare costs are rising with need
The key idea of the NHS is to share healthcare costs fairly across society, not pass them onto the individual. Compelling evidence supports the need for annual funding rises of 3-4% over the next decade. Back in 2018 the Institute of Financial Studies calculated that the NHS will need an extra 3.3% in funding a year for the next 15 years just to keep pace with cost pressures.
These rises were calculated (but not consistently implemented) to help the NHS cope with the rising numbers of older people, those living with chronic disease and the cost of medical advances – all factors which health economists can include in their modelling. But this figure takes no account of the extra costs from the pandemic or the impact of higher-than-expected prices.
2. Inflation means planned spending will fall in 23/24
According to the Health Foundation: planned total health care spending will increase by £3.1bn (1.7%) in 2023/24, and £4.9bn (2.6%) in 2024/25 in cash terms, but adjusting for inflation, planned total health care spending will decrease by £1.5bn (-0.8%) in 2023/24, and increase again in real terms by £1.9bn (1.0%) in 2024/25.
This figure falls well short of the 3.6% average annual rise given to the NHS since its launch in 1948.
3. Aggressive efficiency drives and overly optimistic gains from technology
Over the last decade governments have consistently factored excessive efficiency gains into their funding packages. Historically, the NHS has achieved efficiency gains of around 1% a year – more than in the wider industrial sector, however governments have frequently called for levels of 2-4%. In reality NHS managers can only achieve these by cutting services or avoiding expenditure.
4. Longterm funding is needed to solve the workforce crisis
Lack of NHS capacity lies at the heart of the problems with NHS waiting lists. It has also created the work pressure that is driving staff away from the NHS. The government has announced a much-needed expansion in training places, part of a plan originally promised in 2017. Although welcome, commentators are calling for urgent clarity around what funding will arrive and when, and how long-term this commitment will be.
Full article on The Lowdown, 5 July 2023