Spending on the NHS in England

Published: 21st Jun 2018

Total health spending in England was around £125 billion in 2017/18 and was expected to rise to over £127 billion by 2019/20, taking inflation into account.

In 2017/18 around £110 billion was spent on the NHS England budget. The rest was spent by the Department of Health on things like public health initiatives, education, training, and infrastructure (including IT and building new hospitals).

The government has recently announced that an additional £20 billion in real terms will be made available for the NHS in England by 2023/24—though it’s unclear how much money will be spent on health overall.

Health experts have said this money will “help stem further decline in the health service, but it’s simply not enough to address the fundamental challenges facing the NHS, or fund essential improvements to services that are flagging.”

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.”

The £20 billion of additional funding for the NHS in England will be spread out over the five years to 2023/24. This means an average increase on the NHS’s budget of around 3.4% a year, taking inflation into account.

When this increase is considered in the context of the whole Department of Health budget, the Nuffield Trust think tank has said that this is increase is more likely to be around 3% a year.

The NHS faced a £20 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.

Last year the think tanks said there would be a £4 billion gap in health spending in 2018/19 alone, but the £1.9 billion provided by the government at the end of last year meant that “around half of the minimum gap we calculated has been filled.”

They 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.

To mark the 70th birthday of the NHS in 2018 the Prime Minister has announced that funding for the NHS in England would be increased by £20.5 billion by 2023/24, or by an average of 3.4% per year.

This has been welcomed by the think tanks and others like the Institute for Fiscal Studies (IFS), who have said that the money will allow the NHS to “help stem further decline in the health service”. But they’ve said that increases of at least 4% a year on average are needed in order to meet the NHS’s needs and see any improvement in its services.

It’s unclear what this means for other areas of health spending

The think tanks and IFS have also said it is “worrying” and “unclear” what the £20 billion funding announcement will mean for other areas like public health.

We’ve written more about this here.

Before the announcement 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.

In her announcement of extra funding for the NHS on its 70th birthday, the Prime Minister also said that budgets for social care and public health would be put forward at the next Spending Review. She said these areas needed to be supported “both for the benefits they bring in themselves and to relieve pressure on NHS care.”

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 2017/18. The figure was 65% just among acute hospital trusts—which make up the bulk of NHS trusts across England.

Collectively they finished 2017/18 with a deficit of around £960 million.

The size of the deficit has risen since the year before—in 2016/17 the overall deficit was just under £800 million. But it’s lower than in 2015/16 when the deficit was £2.5 billion.

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. Figures for 2017/18 haven’t yet been published.

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 increasing 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.

Health spending grew at an average annual rate of about 3.7% from 1950/51 up to 2016/17, accounting for inflation. Public spending on health usually increases year on year, and there are only a handful of times in the last 60 years when it hasn’t.We can also look at the level of UK health spending year on year when successive governments were in office. Health spending is devolved so the UK government is only responsible for health spending in England (though changes in health spending may affect the overall budgets of the devolved governments).The average growth between 2009/10 and 2014/15 under the Coalition government was 1.1% and since then under the Conservative government has been 2.3%.

At the moment, UK public health spending is the equivalent of about 7% 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.

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 1949/50 and 2016/17 was about 3.3%, and was 0.6% since 2009/10.


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