The NHS funding shortfall: four futures

2 December 2014

"Health chiefs yesterday welcomed a £2.2 billion "down-payment" on the estimated £30 billion more the NHS will need by the end of the decade." - The Times, 1 December 2014

"The five-year Forward View plan ... warned of a looming £8bn funding shortfall by the end of the next parliament." - The Guardian, 30 November 2014

The government has announced it will spend an extra £2 billion on the NHS next year ahead of Wednesday's Autumn Statement.

Unsurprisingly that's been welcomed by many within the health service, who've been pointing to a growing funding gap for some time now. The shortfall in the amount of money needed to provide the same services and maintain quality is expected to grow.

The size of the looming NHS 'black hole' depends on which paper you're reading—the NHS in England will be either an estimated £8 billion short by 2020 according to the Guardian or £30 billion according to the Times.

There's nothing contradictory about that—in fact, both figures come from the same place. The "Five Year Forward View" published by NHS leaders in October discussed four different scenarios for how much money the NHS would be short by 2020. An £8 billion gap is based on the most optimistic scenario, while £30 billion is the most pessimistic.

Four futures for the NHS in England

Last year NHS England estimated that it'd have a £30 billion shortfall if its funding stayed flat (after inflation) and it was unable to make any efficiency savings.

An efficiency saving is anything that means the NHS can spend less money but treat the same number of patients at the same quality of care.

The Five Year report went over three options for closing that £30 billion gap.

  1. Efficiency savings of 0.8% per year; funding needs to be £21 billion above inflation.
  2. Efficiency savings of 1.5% per year; funding needs to be £16 billion above inflation.
  3. Efficiency savings of 2-3% per year; funding needs to be £8 billion above inflation.

The report says that the second option (which leaves a £16 billion gap) "should be obtainable if the NHS is able to accelerate some of its current efficiency programmes".

The report is clear that the efficiency savings assumed by option 3 (which leaves an £8 billion gap) would require something beyond current measures.

Efficiency savings - the challenge

The NHS in England has been working to achieve £20 billion in savings from 2011 to 2015.

Doubts have been raised about some of the progress the Department of Health reports the NHS has made towards the target. The Public Accounts Committee has called the data used for 2011-12 "unreliable", while the National Audit Office said that there was "limited assurance" that all the savings were actually achieved.

Either way, there are also concerns that many of the savings were either one-offs that won't be repeated in future years, or that the NHS has exhausted the easier and more "obvious" routes towards making savings.

The Five Years report argues that if the NHS is going to close the gap to £8 billion it would need to increase its annual savings from an estimated 1.5% per year to something more like 2-3% per year. To do this there'd need to be investment in entirely new ways of running care. For instance, tests that are normally performed in hospital could be provided elsewhere by GPs or consultants, nursing home residents could be given access to out-of-hours consultations by videolink, or GP surgeries could be opened onsite at hospitals in deprived urban areas.

Efficiency savings of this scale would require upfront investment, and the sooner the better. Experts have called making the savings "very challenging" or suggested that the measures are likely to improve efficiency, but after 2020 rather than before.

Savings can be very contentious. Pay freezes for NHS staff count as efficiency savings as long as they don't reduce the ability of the staff to treat their patients (which is a whole other debate). So making further savings could prove politically difficult.


Image credits brianac37

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