10 years of record low funding rises

The £30 billion funding gap

How did the financial disaster the NHS is faced with today develop so quickly? Indeed how did it develop at all in the face of what the government insists is generous financial settlements and a ring-fenced budget?

First of all the government’s “generous” spending on the NHS from 2010 to 2015 actually only resulted in funding that rose at 0.9% a year in real terms, according to analysts at The Health Foundation and The King’s Fund. In contrast, since the NHS was created in 1948 average real term increases have been 3.7% per year and the average increase between 2001/02 and 2004/05 was 8.6% per year.

At the same time as funding has slumped, demand has increased steadily: from 2009/10 to 2014/15 elective care admissions rose at an average of just over 4% year-on-year and referrals rose at an average of 4.6% year-on-year. It is very clear that funding has not kept pace with demand.

In 2014, the government acknowledged the discrepancy between funding and demand in its Five Year Forward View report; noting that a combination of growing demand, no further annual efficiencies, and flat real terms funding could, by 2020/21, produce a mismatch between resources and patient needs of nearly £30 billion a year.  So armed with this information on a £30 billion funding gap, the government made an £8 billion pledge to funding the NHS from 2014/15 to 2020/21.

£8 billion from the Government

So how did the government decide that what the NHS needed was an extra £8 billion to not only protect the NHS, but improve it as well, when the figure of £30 billion was the funding gap to be filled.

According to the government £8 billion was the figure Simon Stevens, CEO of NHS England, had requested. However, in March 2016 it came to light that the £8 billion might not be all that it at first appeared. The figure of £8 billion was reportedly taken from a report by Simon Stevens; however, David Laws, a former Liberal Democrat MP and chief secretary at the Treasury, has asserted that £8 billion was not the original figure Stevens was seeking.  In Laws’ book, excerpts of which were published in The Daily Mail, he reports that Stevens originally asked for £15-16 billion extra from the government.

The Government is reported to have then exerted pressure on Stevens to amend his report to get it down to the much smaller £8 billion amount. The government wanted to bridge the £30 billion a year funding gap by 2020 by making £22 billion in efficiency savings, leaving the £8 billion a year for the government to make up. Laws notes in his book that this pressure resulted in the supposed possible efficiency savings being increased to “totally unrealistic” levels. So in fact the Conservatives already knew from Stevens’ report that £8 billion would not be enough to protect the NHS and, as Laws noted in an interview the £8 billion pledge was therefore “disingenuous.”

But £8 billion is not £8 billion in real terms

So the government has promised £8 billion for the NHS to fill at £30 billion gap, however it is also now clear that this £8 billion is in reality not actually £8 billion, but a lot less.  NHS England will receive £8 billion, but health spending not covered by NHS England, i.e., public health, Health Education England and several other organisations, is actually being cut by 20%. The net result for the Department of Health as a whole is an increase in spending of only £4.5 billion from 2015/2016 to 2020/21. This equates to an average 0.9% increase in spending per year for the NHS over this period, way below the historical yearly average of 3.7%.

Jeremy Hunt has been insistent that the NHS is receiving generous funding increases - he has even gone as far as claiming that the rise in funding in 2016/17 is the "sixth-biggest" in the history of the NHS. This was thoroughly de-bunked in May 2016 by economists at The Health Foundation and The Kings Fund; Prof John Appleby, the Kings fund’s chief economist, and Adam Roberts, of the Health Foundation, analysed the last 41 years of funding data, and found that the NHS real spend increase of 1.6% that Hunt is giving the NHS in 2016/17 is the 28th-largest increase since 1975-76.

In a blog on the King’s Fund website, Appleby and Roberts also note that Hunt's claim that the government are giving the NHS in England an extra £3.8 billion this year is untrue with the true figure being just £1.8 billion.