Health spending isn’t set to account for almost half of all taxes

“Health spending accounts for 27% of day-to-day public spending in 2000, is set to rise to 44% by the year after next. So essentially, all the taxes you pay—everything that’s levied, whether it’s through income tax, NI, VAT, whatever else you want to do—roughly 50p in the pound will go to the health service.”

LBC presenter Nick Ferrari has claimed that almost half of taxes are set to be spent on health.

This is based on the claim that 44% of “day-to-day public spending” the year after next is set to be spent on health, up from 27% in 2000. 

Claiming that 44% of “day-to-day public spending” will be spent on health is potentially misleading for reasons we have written about before. While it is predicted that health will soon account for 44% of budgeted departmental spending, it will represent a much smaller share of the government’s total public spending.

Where does the 44% estimate come from?

Mr Ferrari’s figures appear to come from the economic research institute, the Institute for Fiscal Studies (IFS), which reported in September 2021: “[I]t is worth noting that even without any top up, health spending is set to account for an ever-growing share of total day-to-day public service spending: 44% by 2024−25, up from 42% in 2019−20, 32% in 2009−10, and 27% in 1999−00.”

Last September, the IFS told Full Fact it uses the phrase “day-to-day public service spending” (our emphasis) to refer to non-capital spending covered by departmental budgets. Other research bodies use this kind of phrasing in a similar way too, with the Institute for Government, for instance, using “day-to-day spending” to refer to what’s technically known as “resource DEL (Department Expenditure Limit)” budgets. But this is potentially confusing because this kind of spending only accounts for about half of all public spending, and doesn’t cover things like welfare and pension payments that many might also consider “day-to-day” spending. 

If you look at all public spending, then the picture is very different. While there are different ways to calculate an alternative proportion, government figures published last year suggested in 2021/22 it planned to spend about 22% of its total budget on health. 

How the government spends money

Government spending can be broken down into two main types:

• Departmental budgets, which the government can, essentially, plan for and control
• Annually managed expenditure (AME), which the government can’t control that easily

For example, the government can set a budget for the cost of running a hospital, and this would be part of a departmental budget. 

But it can’t really control how much it is going to spend on Universal Credit payments. It can, of course, estimate how much it expects to spend, but it can’t set a hard limit on its “budget” for benefit payments, and so these fall under AME.

Then, both types of spending can be further subdivided into capital spending, which includes spending on one-off investment projects like building a hospital or road, and day-to-day “resource” spending, on things like maintaining that hospital or road year after year. 

So that gives you essentially four types of spending. In 2020/21 the total spent on each and as a proportion of all public spending were as follows:

• Departmental budgeted “resource” or day-to-day spending (£509 billion, 46%) 
• Departmental budgeted capital spending (£94 billion, 8%) 
• AME “resource” spending, which might also be considered day-to-day  (£481 billion, 43%) 
• AME capital spend (£31 billion, 3%)

The IFS estimate that health will soon account for 44% of “day-to-day public service spending” only looked at this first category—day-to-day budgeted spending on health as a share of all departmental budgeted day-to-day spend, not the share of all “resource” spending (including AME), nor of all public spending (including capital spending). 

What proportion of public spending will go on health?

To get a better idea of what share of public spending in 2024/25 will be spent on health—and by extension, roughly what proportion of tax could go towards it—you’d need estimates of the expected spend via both the health department’s budget and its annually managed expenditure.

AME, by its nature, is quite unpredictable, and although there are forecasts for the total amount the government expects to spend through AME in 2024/25, there aren’t AME forecasts for health specifically.

However, we can look at recent data to illustrate the general issue with Mr Ferrari’s comment.

In July last year, the government expected to spend £485 billion on day-to-day departmental budgets in 2021/22. Of this, £178 billion, or 37%, was on health and social care. 

But if you include AME, then the government expected to spend a total of £934 billion on day-to-day spending in 2021/22, of which £222 billion, or 24%, would be for health and social care.

And if you include the capital spending (that is, the spending that isn’t what could be classed as day-to-day spending), health and social care accounts for around 22% of all public spending in 2021/22. 

This isn’t a definitive estimate. These figures don’t reflect any policy changes made since their publication in July (such as the health and social care levy) and so may not reflect the latest situation, and of course they refer to planned spending in 2021/22 rather than the predicted spending in 2024/25 which Mr Ferrari was talking about.

However, they do show that concentrating only on departmental day-to-day budgets makes it appear as if health accounts for a much greater share of total spending than is actually the case.

Image courtesy of Ian Taylor