How much public health spending goes to the private sector?

20th Nov 2019

The possible privatisation of the NHS has emerged as one of the key debates of the election so far, and has been widely discussed by politicians and the media alike. So it’s worth asking: what role does the private sector currently play in the NHS?

According to the King’s Fund health think tank “it is difficult to determine how much the NHS spends each year on the private sector.” Depending on exactly how you look at the figures, public spending on healthcare services from private and non-NHS organisations could be anywhere between 7% and 22% of its annual budget. If you just look at spending by NHS England it could total as much as 26%. But these higher figures include things which not everyone might consider a ‘private service’ like GP services and pharmacies.

How much does the NHS spend on the private sector?

The main source of information we have on how much the NHS in England spends on the private sector is published by the Department of Health and Social Care (DHSC) and covers the amount of money spent on ‘independent sector providers’ as well as the money spent on buying healthcare services from local councils and the voluntary and not-for-profit sector.

In 2018/19 around £9.2 billion was spent on buying healthcare from independent sector providers by the NHS in England. That’s 7.3% of all health spending and the number you might most often see associated with spending on the ‘private sector’.

If you add in the other organisations like local councils then the NHS spent £13.7 billion on buying healthcare, or 11% of all DHSC spending. We’ve written more about the recent trends in this spending here.

The King’s Fund also found that NHS providers (or trusts) spent £1.3 billion on services from non-NHS organisations in 2018/19 and £271 million on “outsourcing patient services to other providers”.

The Health Foundation and Institute for Fiscal Studies (IFS) say “While the NHS has always purchased some services from the private sector, the role of the private sector in providing routine community, diagnostics and elective (non-emergency) care was formalised and expanded in the 2000s, and now accounts for a significant share of public spending on health in England.”

The King’s Fund says: “The extent of private sector-commissioned services varies between different areas of care. For example, evidence suggests that spending on private providers increased more quickly in community services and mental health than in other services. This may be, for example, because of contracts being more frequently retendered in these services and because more non-NHS providers are operating in these service areas.”

There are other areas of spending you could count

Counting exactly what constitutes private spending by the NHS is a complex business and there’s not necessarily one correct way to do it. David Rowland, director of the Centre for Health and the Public Interest has looked at a wider set of areas and found that, according to his calculations, the NHS England spend on the private sector is closer to £29 billion in 2018/19, or 26% of NHS England spending. Spending on NHS England makes up the bulk of money spent by the DHSC, but not all of it.

This takes as its starting point the £13.7 billion figure from the DHSC accounts.

The £1.3 billion spent by NHS trusts on services from non-NHS organisations is added to that.

Added to that is the £14 billion the NHS spent on commissioning primary care from the private sector. This includes things like GP services, pharmacies, and opticians. This may not be what everyone things of when they think of the NHS spending money on private providers, but technically they all are. Mr Rowland acknowledges there is “genuine debate” as to whether the provision of GP services fall under private spending “given that they derive almost all their income from the NHS”.

Finally, it includes the £830 million the NHS in England spends on social care services and a lot of these are provided by private organisations.

Another health think tank, the Nuffield Trust, has used a similar method to determine that, over the last decade, between 20% and 22% of annual public spending on health in England has gone towards procuring healthcare services from private providers. It looked at spending by trusts and clinical commissioning groups on purchasing healthcare services from private organisations, councils, charities and spending on optometrists, GPs, dentists and pharmacists as a percentage of all DHSC spending.

What’s clear is that there are lots of different ways the figures could be calculated depending on how exactly you define spending on ‘private providers’. For example, following this research the Health Services Journal announced it would “describe the NHS’ spend with private sector healthcare providers as, “at least 9 per cent of the NHS England budget”.”

The King’s Fund says: “The 7.3 per cent figure from the Department of Health and Social Care accounts is likely to underestimate total spending on the private sector. But it is debatable whether higher estimates of private spending—that include spending on GP services and not-for-profit charities—are a truer reflection.”

Correction 3 February 2020

An earlier version of this article incorrectly stated that the Centre for Health and the Public Interest was part of the London School of Economics.

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