Will the NHS get a long-term funding plan?

April 2018

At the end of March, the Prime Minister, Theresa May, announced a pledge to bring in a long-term funding plan for the NHS. It appears that finally, the government has recognised that the NHS is struggling with short-term funding commitments. The issue now is will this new commitment give the NHS the money it needs each year to keep up with the increase in demand predicted. 


This decision by the Prime Minister for a long-term plan was reportedly due to the considerable pressure she has been under from within the Conservative party to adopt a different approach to funding, replacing the small spending rises that the NHS has been given since 2010, with something more substantial and long-term. 

It can also not have escaped the Prime Minister’s notice, that the NHS has just experienced a terrible winter crisis, which saw thousands of non-urgent operations cancelled, the worst A&E waiting times ever documented, overwhelmed emergency centres and patients stranded on trolleys in hospital corridors. The public is now very aware of the underfunding of the NHS.

Jeremy Hunt, speaking on ITV's Peston on Sunday Programme (25 March 2018), hinted that he is keen on a 10 year funding plan; this would take the plan over at least two parliamentary terms.

Will the NHS get the 4% per year it needs?

From the NHS’s creation in 1948 until 2010 the NHS received on average an increase of 4% per year. The Office of Budget Responsibility (OBR) has calculated that for the NHS to receive this again, the NHS budget would need to rise to £150bn by 2022-23.

This is £20bn more than the current plan and a huge increase on the £125bn that has gone into health in England this year.

Anita Charlesworth of the Health Foundation quoted in The Guardian noted that “All independent analysis suggests that the NHS and care system need increases of about 4% a year above inflation."

The most recent budget in November 2017 only provided the NHS with an additional £1.6 billion in 2018/19. To this was added an extra £540 million by the Department of Health and Social Care, although it is still unclear whether this is new money or raised from cuts elsewhere. Overall the budget gave the NHS a real-term growth in funding of 2.4%, slightly up on 2% in 2017/18; well below the historical average of 4%.

Another issue surrounding the current increases in funding is that the money does not all go direct to the frontline. Only £600 million goes to CCGs (frontline commissioning organisations). The remainder of the money is tied up various funds with strings attached, including the Provider Sustainability Fund (previously the Sustainability and Transformation Fund) and the new Commissioner Sustainability Fund.

What about funding for social care?

Many of the issues facing the NHS over this last winter have been due to the lack of social care provision by local councils. These councils have been hit by substantial cuts to funding and the knock-on effect is that hospitals were unable to discharge many elderly patients due to a lack of long-term care provision by councils.

It seems, therefore, imperative that any long-term plan for the NHS would need to be backed up with an overhaul of social care funding; if this does not happen then funding increases for the NHS will have less of an impact.

Where would the money come from?

Discussion in the media has surrounded the introduction of a tax of some form (possibly based on National Insurance) that would be devoted to funding the NHS. Jeremy Hunt on ITV's Peston on Sunday (25 March 2018) seemed positive about this approach: “If you ask the public…they are very clear they would like to see more money going to the NHS and they would be prepared to see some of their own taxes going into the NHS but they are very clear they want to know that money is actually going into the health and social care system and they want to know the NHS is going to reform and tackle some of the inefficiencies."

However, according to an article in the HSJ, many economists, including the Nuffield Trust’s John Appleby and the Institute of Fiscal Studies' Paul Johnson, warn that this approach carries a number of dangers, including NHS funding being squeezed when the tax take falls during economic slowdown or recession.