Spending on the NHS 2010-present

The NHS was widely regarded as one of the most efficient healthcare systems in the developed world. A study comparing the healthcare systems of 11 countries between 2011 and 2013 found that the NHS scored highest on quality, access and efficiency. The UK’s overall top ranking was also achieved on the second lowest spending per capita across the 11 countries, at $3,405, only more than New Zealand ($3,182)[1].

By 2016 the picture for efficiency starts to change quite markedly, due a reduction in funding. The reduction in funding was the highest since 1951[2].

The NHS has found itself having to cover more services:

  • An increased need for services – for example, as a result of increased incidence of obesity and diabetes
  • A 4% increase in the costs of new medical treatments
  • A £4.6 billion reduction in local authority social care budgets since 2011 (a net budget cut of 31%), which has knock-on effects for the NHS – such as increased use of A&E and hospital services [3]
  • The annual transfer of NHS funds to the Better Care Fund (£3.8 billion from 2015). This Fund was set up to support the integration of health and social care, largely by cutting hospital care for those who are chronically ill and the frail elderly and replacing it with supposedly cheaper care in the community
  • The claw back of money from the Department of Health by the Treasury (for example, nearly £3 billion for the two-year period 2010-12) [4]
  • The annually recurring costs of running the NHS as a market (at least £4.5 billion p.a.) following the Health and Social Care Act of 2012 introduced by the Tory LibDem coalition [5]
  • The huge cost of Private Finance Initiative repayments on debt owed by NHS trusts and Foundation trusts following the end of government lending for capital projects such as new hospital buildings. It’s been estimated that the NHS is spending more than £3,700 every minute to pay for privately financed hospitals [6]l
  • A cut of £200 million in Local Authority public health budgets which fund many services such as school nursing, screening programmes, and smoking cessation programmes – despite recognition by the boss of NHS England of the need for “a radical upgrade in prevention and public health”. It is feared that this cut will not only affect preventative and public health services but will also have a serious knock on effect on NHS healthcare services. [7]
  • A cut in the money paid by the government to NHS providers for their work under the Payment by Results system from 2010/11. Over three-quarters of each hospital’s funding has come from this system through which hospitals are paid per treatment, according to prices set by a tariff. In recent years, payments have been cut by over 40% for a quarter of the treatments that hospitals provide [8]. So, for example, a hospital providing routine knee surgery would have been paid £3,077 for each procedure in 2009/10, but by 2013/14, the hospital would have received £1,673 for the same procedure.

By the end of the Tory / Libdem coalition, hospitals had seen their budgets drastically cut at a time when budgets needed increasing to meet greater demand. In effect the Lib Dems by enabling the Tories had facilitated the destruction of the NHS.

From 2016 onwards budgets fell sharply, down to just a 0.9 per cent increase in 2017. It would then go negative by 2018-19 with a 0.6 per cent fall in real spending per head in that financial year.

Growth would remain very low in 2019-20 at 0.2 per cent and 0.9 per cent in the years following. The wider health budget outside the NHS received even more sustained cuts, with two years of shrinking resource per head and a maximum growth rate of 0.4 per cent after 2017. This includes staff training and public health.

  1. UK NHS named best healthcare system by the Commonwealth Fund, NHS Foundation, 1 July 2014: https://www.nhsconfed.org/resources/2014/07/uk-nhs-named-best-healthcare-system-by-the-commonwealth-fund
  2. Underfunded, underdoctored, overstretched: The NHS in 2016, The Royal College of Physicians (RCP), 21 September 2016: https://www.rcplondon.ac.uk/guidelines-policy/underfunded-underdoctored-overstretched-nhs-2016
  3. Vunerable adult social care risk: England-councils-face-1bn-shortfall, Guardian, 13 July 2016: https://www.theguardian.com/society/2016/jul/13/vulnerable-adult-social-care-risk-england-councils-face-1bn-shortfall
  4. Exclusive: Nearly £3bn returned to Treasury: https://www.hsj.co.uk/topics/finance-and-efficiency/exclusive-nearly-3bn-returned-to-treasury/5051242.article
  5. At what cost? Paying the price for the marketin the English NHS https://chpi.org.uk/wp-content/uploads/2014/02/At-what-cost-paying-the-price-for-the-market-in-the-English-NHS-by-Calum-Paton.pdf
  6. The PFI hospitals costing NHS £2bn every year, The Telegraph, 18 July 2015: https://www.telegraph.co.uk/news/nhs/11748960/The-PFI-hospitals-costing-NHS-2bn-every-year.html
  7. Osborne announces £200m cut to public health budgets, HSJ, 4 June 2015: http://www.hsj.co.uk/news/osborne-announces-200m-cut-to-public-health-budgets/5086553.article
  8. Death by a thousand tariff cuts, OpenDemocracy, 28 April 2015: https://www.opendemocracy.net/ournhs/matt-dykes/death-by-thousand-tariff-cuts

NHS Deficit

In 2010/11, just 5 per cent of these providers overspent their annual budgets. By 2015/16, two-thirds of trusts (66 per cent) were in deficit as the slowdown in NHS funding took its toll.

The 2015 Spending Review provided additional funding for the NHS in the form of a £1.8 billion annual ‘Sustainability and Transformation Fund’. This funding contributed to a fall in deficits, but 44 per cent of trusts still overspent their budgets in 2017/18, with acute hospitals accounting for just under 90 per cent of all providers in deficit. The NHS provider sector as a whole ended 2017/18 with a deficit of £960 million.

The national planning guidance for the NHS states that £2.45 billion of funding support will be available to NHS trusts in 2018/19 through a ‘Provider Sustainability Fund’ which will replace the Sustainability and Transformation Fund. This guidance also states an ambition that the NHS provider sector will financially balance in 2018/19.

However, at the halfway point in 2018/19 NHS trusts are forecasting to end the year £558 million in deficit[1].

Sally Gainsbury, a senior policy analyst at the Nuffield Trust, a thinktank, said: “NHS providers started the financial year 2017/18 with a £4bn black hole between their underlying costs and income that was deepened further over the year.

“So while hospitals and other NHS services did make efficiency savings over the year, the vast bulk of those savings were needed just to stop the black hole getting any deeper. Essentially, services are having to run to just stand still, or even move slightly backwards.

“The real underlying deficit is likely to remain very similar to where it was at the start of the year – at around £4bn, which is inevitable as long as we continue to systematically pay hospitals and other services less than the cost of actually delivering care.”

In March, the public accounts select committee said NHS finances “remain in a perilous state”.

“The NHS is still very much in survival mode, with budgets unable to keep pace with demand. The NHS has a long way to go before it is financially sustainable,” the committee said [2].

Spending on Social Care and the impact on the NHS