Spending on the NHS in England

Published: 8th Nov 2017

Total health spending in England is nearly £124 billion in 2017/18 and is expected to rise to over £127 billion by 2020/21, taking inflation into account.

Around £110 billion will be spent on the day to day running of the NHS. The rest is spent by the Department of Health on things like public health initiatives, education, training, and infrastructure (including IT and building new hospitals).

The NHS is facing severe financial pressures, with trusts across the country spending more than they’re bringing in. The NHS was also asked several years ago to find £22 billion in savings by 2020, in order to keep up with rising demand and an ageing population.

Health experts from the Nuffield Trust, Health Foundation and King’s Fund say tight spending in recent years and increasing demand for services have been “taking a mounting toll on patient care”. They add that there is “growing evidence that access to some treatments is being rationed and that quality of care in some services is being diluted.”

They also cite concerns that there isn’t enough money going into social care, which we’ve looked at elsewhere.

The NHS faces a £30 billion funding gap by 2020

In 2013, NHS England said it faced a funding gap of £30 billion by the end of the decade, even if government spending kept up in line with inflation. So it needed that much more to deliver care to a growing and ageing population, assuming it made no savings itself.

A year later the NHS laid out plans for how it might handle this gap. One ambitious option was that the NHS itself would find £22 billion in savings, leaving the other £8 billion to be filled by the government.

The Conservatives said in their 2015 election manifesto they would provide that £8 billion in government, and expect the other £22 billion in savings from the NHS. The Nuffield Trust, writing in our election report, said this still left unanswered questions on funding:

“£8bn is the bare minimum to maintain existing standards of care for a growing and ageing population …

“improving productivity on this scale [£22 billion] would be unprecedented”

The new Conservative government followed through on the commitment and started claiming it was giving £10 billion, giving the NHS what it asked for, and more.

In their 2017 election manifesto, the Conservatives said they would increase NHS spending by at least £8 billion in real terms over the next five years, and increase funding per head of the population for the duration of the parliament.

The think tanks have said even based on the government’s current spending plans there is likely to be a spending gap of over £20 billion by 2022/23. They also have said that the NHS will need an extra £4 billion next year alone “to stop patient care deteriorating”.

The government’s “£10 billion” spending claim can’t be taken at face value

The government has previously claimed that it’s putting an extra £10 billion into the NHS by 2020/21, more than NHS executives have asked for.

This isn’t as generous as it sounds, and the chief executive of NHS England has directly contradicted the claim that it’s getting more than it requested. The Health Select Committee has also criticised the government for its repeated use of this figure, as have the Nuffield Trust, Health Foundation and King’s Fund.

First of all, the pot of money has been redefined.

The government’s claim is just about the NHS England budget, rather than total health spending in England which includes things like public health, education and training. Funding outside the budget of NHS England is set to fall by over £4 billion from 2015/16 to 2020/21.

Secondly, the head of NHS England, Simon Stevens, has said the service isn’t getting more than it asked for. He told the Public Accounts Committee of MPs in January:

“It is right that by 2020 NHS England will be getting an extra £10 billion over the course of six years. I don't think that's the same as saying we're getting more than we asked for over five years because it was a Five Year Forward View [that the NHS set out] not a six year forward view.

“Over and above that, we've obviously had a spending review negotiation in the meantime, and that has set the NHS budget for the next three years.

“It is a matter of fact ... that, like probably every part of the public service, we got less that we asked for in that process. And so I think it would be stretching it to say that the NHS has got more than it asked for.”

He also said last year that the money the government has committed is at the lowest end of a range of options the NHS set out.

For it to be enough, the service also needs to see “continuing access to social care” and “enhanced effort on prevention and public health”. Public health spending is expected to fall and spending on social care is set to fall short of what experts think is needed.

In 2015 the NHS itself highlighted these two areas as needing improvement.

That said, the government is ‘front loading’ the spending increases over this period—meaning that more money will be made available in the early years, and comparatively smaller increases in the later years.

At present, funding in 2018/19 is expected to grow by 0.4%, taking inflation into account. Rises like these “will not keep pace with the growth and ageing of the population, so spending on health care per person will fall by 0.3% in real terms”.

NHS England budget increasing, public health budget falling

The amount of money the government spends on health in England is roughly equivalent to the Department of Health’s budget, which is the same £124 billion figure we quoted above.

Within that pot of money, the government spent about £110 billion on NHS England, which oversees the vast majority of spending, with the rest going to things like public health, education and training.

The NHS England budget is expected to rise by about £9 billion from 2015/16 to 2020/21, taking inflation into account. Meanwhile spending on the other areas is set to fall by £4 billion.

That means, overall, health spending in England is set to rise by £4.6 billion between 2015/16 and 2020/21.

NHS providers are in deficit

About 44 % of NHS trusts—which provide secondary care to patients who’ve been referred there by a GP—were in the red in 2016/17. The figure was 61% just among acute hospital trusts – which make up the bulk of NHS trusts across England.

Collectively they finished 2015/16 with a deficit of just under £800 million.

The size of the deficit has fallen since the year before—in 2015/16 the overall deficit was £2.5 billion.

But the Nuffield Trust has said that a large amount of the decrease in the deficit in 2016/17 came from one-off savings, accounting adjustments and £1.8 billion in sustainability funding – money from the Department of Health to help trusts plan for the future. Without these funds the Nuffield Trust says that NHS trusts deficit would have been at £3.7 billion.

By contrast the Department of Health underspent overall in 2016/17 by £560 million.

UK-wide spending has been rising long-term, but more slowly in recent years

Looking at the wider UK, the amount spent on health has been rising over the long-term. That’s true whether it’s expressed in cash, cash adjusted for inflation, per person, or as a proportion of the size of the economy. All those trends show spending stalling or falling slightly in the years after 2010/11 – at the same time as most other departments saw reductions in spending – and picking up again in more recent years.

Back in May this year, the Institute for Fiscal Studies said government plans implied while real-terms spending on health in England was set to rise over the next five years, per person it would fall. The King’s Fund, Nuffield Trust and Health Foundation have said that NHS spending per person is set to fall by 0.3% in 2018/19 compared to the year before.

At the moment, UK public health spending is the equivalent of about 8% of GDP, similar to what it was back in 2010 and higher than in previous years. Back in 1955, it was worth about 3% of GDP.

Health spending grew at an average annual rate of about 4.1% from 1955/56 up to 2015/16, accounting for inflation. The average growth has only been 1.3% a year since 2009/10.

Demand for health services has also increased over time. Adjusting the same figures above to account for the population, the average annual growth in per person spending between 1955/56 and 2015/16 was about 3.7%, and was 0.6% since 2009/10.

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