“We’ve announced an unprecedented £84 billion real-terms funding boost for the NHS, what the NHS says it needs”.
Philip Hammond MP, 1 October 2018
This claim, first made by the Chancellor in his Conservative party conference speech last week, came to our attention after the Health Services Journal called the figures into question.
The government announced only a few months ago that the NHS would receive a funding increase of £20.5 billion between 2018/19 and 2023/24. Now, the Chancellor is citing a figure four times that amount, for apparently the same thing. Always curious about numbers which look out of place, we decided to investigate further.
We’ve found that while the figures used by the Chancellor are correct they’re not a very helpful way of looking at the numbers. £84 billion is roughly the figure you get to if you add up the extra money for the English NHS in each year to 2023/24 compared to 2018/19, adding in extra fundin g for Scotland, Wales and Northern Ireland that results (a ‘cumulative’ increase).
That’s as opposed to the more conventional method, which is simply to take the difference in spending between 2018/19 and 2023/24—which is the more familiar £20 billion the government has claimed in the past.
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How we got here
In his speech the Chancellor said that the NHS would be receiving a real-terms funding boost of £84 billion. NHS England’s budget was around £110 billion in 2017/18, so an increase of that amount would be quite considerable.
Health spending is devolved, so the UK government is only responsible for how money is spent on the NHS in England. NHS England’s spending makes up most of the Department of Health and Social Care’s budget, with the rest spent on things like public health initiatives, education, training, and infrastructure.
In June this year the government announced that the NHS in England would receive a funding increase of £20.5 billion between 2018/19 and 2023/24. That figure accounts for inflation (the fact that prices will change over the years and so it will become more expensive to buy things with the money).
So where did £84 billion come from?
We spoke to the Treasury, and it told us that Mr Hammond was referring to the “the cumulative cash cost of the NHS settlement”—that’s the £20.5 billion announced earlier this year. It also told us it includes extra money which would go to Scotland, Wales and Northern Ireland through the Barnett formula.
This formula aims to make any changes in government funding for English services have the same pound-per-person effect on the money which goes to the rest of the UK for those services. So increasing the money that the NHS in England has to spend means the Treasury needs to increase the amount of money the devolved governments in the rest of the UK have to spend.
At the time the Treasury told us that the details of the £84 billion figure weren’t published anywhere (though some of the information has since been published along with the 2018 Budget). Along with the Nuffield Trust we tried to work out how the number might have been achieved for ourselves and checked our calculations with the Treasury.
The Treasury confirmed to us that other than some small differences in terms of rounding the figures and how inflation was calculated, our figures were in line with theirs.
How was the £84 billion calculated?
In 2018/19 the NHS England budget will be about £115 billion (in 2018/19 prices).
In its June announcement the government set out the percentage that the NHS England budget would increase by each year—after accounting for inflation. It will be between 3.1% and 3.6%. Based on this the NHS budget will be around £135 billion in real terms by 2023/24.
That’s where the usual claim about NHS funding increases—£20.5 billion in total by 2023/24—comes from.
We can then compare how much the budget will have increased by in each year compared to 2018/19. Adjusting this for inflation we can get the cash increase for each year.
To that we add the extra money going to Scotland, Wales and Northern Ireland as a result of the Barnett formula.
We then add the additional £1.25 billion a year which the government announced would be put towards the expected increase in NHS employer pension contributions from 2019/20 onwards.
Adding all of these total annual increases together comes to £84.8 billion by our calculations.
Using the newer figures published alongside the budget we can see that the cumulative cash increase in the whole policy—the increase in the NHS budget in England, the extra money for Scotland, Wales and Northern Ireland, and the money for pensions—comes to £83.6 billion by 2023/24.
But there are problems with this method
There are a number of problems with this method of explaining the increased spending on the NHS over the next few years, some of which we’ve looked at below.
For one, adding several years of spending together is simply not the normal way politicians talk about spending increases. They most commonly refer to spending on a per-year basis, or talking about the difference between the first and final year of spending (as the government have usually done with this announcement too ). It’s not factually wrong—but it could be misleading.
This method also allows you to claim big numbers about health spending without context, and in a way that’s difficult for people to make sense of. Adding just a few years extra to the time period covered, for example, would let you cite even bigger sounding numbers without any “extra” money going in per year in real terms.
The figures being cited by the Treasury aren’t obviously coherent with the published figures on health spending and aren’t easy to calculate. That’s bad news for anyone who wants to hold the government accountable for its spending announcements.
It’s also only part of the picture on health spending in England. Looking just at the English NHS’s budget in isolation from the rest of the money spent by the Department of Health and Social Care doesn’t tell you about other health spending that’s going down.
Prior to the announcement of new funding in June public health spending was expected to fall up to 2020/21 and spending on social care was also set to fall short of what experts think is needed. We’ve written more about the implications of this here.
Another issue is that the money going to the rest of the UK through the Barnett formula won’t necessarily be spent on the NHS in Scotland, Wales and Northern Ireland, so it’s potentially misleading to describe it this way. Even though the devolved governments in each of those regions get the money because of increased NHS spending in England, they can spend the money however they wish.