NHS spending has risen less quickly than was planned at the last election, despite the pandemic and record waiting lists
15 May 2024Conservative party plans at the 2019 general election implied that the day-to-day health budget in England would rise by 3.3% per year in real (inflation-adjusted) terms over this parliament. The government’s latest plans imply average growth of 2.7% per year, with additional cash funding for the health service more than offset by higher inflation.
In other words, despite a pandemic, record waiting lists and growing rates of ill health, real-terms health spending has risen less quickly than was planned five years ago. This breaks the habit of a lifetime: over the past 40 years, the NHS budget has almost always grown more quickly than originally planned. This parliament is the exception.
Health spending has grown more slowly than originally planned, and more slowly than the long-run average, but because economic growth has been so feeble, health spending as a share of GDP has grown more quickly than usual. Put differently, because our national income has grown so little, we have had to take more of it just to secure below-average rates of growth in the health budget. Weak growth makes everything harder.
The latest plans imply no real-terms growth for the NHS England budget between 2023–24 and 2024–25. There are currently no published plans for health spending beyond that point. Whoever takes office after the next election won’t have long to decide budgets for the NHS and other government departments for the next fiscal year (2025–26). Given the well-documented pressures on the NHS, holding spending flat in real terms is unlikely to be a sustainable long-term strategy. If we disregard the recent years when exceptional pandemic funding was withdrawn, the last time that the health budget failed to grow for two consecutive years was in the 1950s. The NHS England workforce plan – endorsed by both main UK parties – implies a real-terms funding growth of around 3.6% per year if it is to be achieved. That is a more realistic benchmark.
These are among the findings of a new pre-election IFS briefing, funded by the abrdn Financial Fairness Trust and the Nuffield Foundation, which examines the past and future of UK health spending.
Max Warner, a Research Economist at IFS and an author of the report, said:
“Whichever party takes office after the next election won’t have long to set out departmental budgets for the next fiscal year, and the choice of how much to give to the Department of Health and Social Care – which now represents more than 40% of total day-to-day departmental spending – will effectively dominate everything else. Spending on the health service will – absent a big reduction in the role of the NHS, or further deterioration in quality – have to rise in real terms to meet the pressures the service faces and deliver the workforce plan which both the main UK parties have signed up to. But the sheer size of the health budget means that delivering funding increases at anything like the historical average would require cuts elsewhere, even before accounting for recent promises on defence spending. Neither the Conservative party nor Labour party have been keen to set out spending plans. But the next government will have to confront this reality – and fast.”
Mark Franks, Director of Welfare at the Nuffield Foundation, said:
“Increasing demands on the NHS, driven by demographic change and availability of new treatments, mean that it accounts for a large and growing chunk of public spending. This raises fiscal challenges that the next government will have no choice but to grapple with. However, we should not think about it purely in terms of cost to the public purse, because a well-functioning NHS is vital to the wellbeing of the population, including its most vulnerable members. And as the NHS expands to account for a greater share of government spending and employment, it will take on greater macroeconomic significance.”