Government must be honest about difficult trade-offs health service now faces

New analysis from the Health Foundation’s REAL Centre sheds light on the significant uncertainty facing the delivery of health services over the remainder of this parliament. While the welcome increase to the NHS budget will provide temporary respite, we warn that health and care services will face difficult trade-offs.

The extra funding announced in the 2022 Autumn Statement will mean that for the parliament as a whole (2019/20 to 2024/25), NHS spending will increase by an average of around 3% a year in real terms. But for the next two years the increase in the NHS budget amounts to 2% each year in real terms*. The NHS budget is part of the Department of Health and Social Care overall budget for health care (DHSC TDEL), covering workforce education and training, public health services like health visiting and capital investment. Taking the DHSC budget as a whole, the annual increase for the next two years is 1.2% in real terms, which is below the average seen in the decade preceding the pandemic (2%), as well as the historical average of around 3.8%. 

Future spending growth at these levels raises big questions over the scale and pace of the recovery with health services facing a cocktail of higher inflation, higher demand, ongoing costs from COVID, staff shortages and challenging efficiency requirements. It also leaves no room for modernisation or improvement.   

About this chart

The budget allocated to the Department of Health and Social Care (DHSC) is relatively shielded, as government plans a 1.2% growth each year by 2024/25. However – setting aside the substantial funding injection in response to COVID-19 – this settlement comes on the back of a decade of lower funding growth. As shown in this figure, periods of low health care funding are usually followed by phases of growth, allowing services to tackle accumulated pressures such as rising waiting lists and staff vacancies. However, since rising by nearly 7% per year in the 2000s, health care funding in England has seen a prolonged squeeze, with growth of just 2% per year in the 2010s. 

What are the factors driving up pressures on health care services?

Our analysts point to several factors driving up pressures on health care services. 

• England’s growing and ageing population: older people tend to use more health care than their younger people. These pressures are only expected to increase, with the population aged 85 and older growing faster than the wider population, morbidity increasing and a rising number of deaths anticipated in the coming decade.
• NHS Long Term Plan commitments: on the supply, in 2019 the government pledged to invest in care outside hospital, including in community health, general practice and mental health, in order to improve services. Pressure in these areas remains pronounced post-pandemic.
• A long waiting list for elective care: this recently hit 7.1 million and continues to rise. The government’s elective recovery plan set a target of delivering 30% more activity than before the pandemic by 2024/25. This could still see the waiting list rise over the short term, with the peak depending on the number of returning missing referrals. However, this relies on achieving the activity growth target, which the NHS has so far struggled to do. Activity remains around pre-pandemic levels.
• Workforce shortages and pay: vacancies now stand at around 130,000 across the NHS, with even greater shortages in social care of around 165,000. Without concerted efforts to expand the workforce the NHS’s ability to recover services will be undermined. Continued uncertainty about public sector pay awards and how that might impact retention and future budgets also raises big questions.

Anita Charlesworth, Director of the REAL Centre at The Health Foundation, said:

‘Thursday’s statement offered short-term relief, especially compared to other public services. But the reality is that the NHS is going to be treading water at best, as inflation bites and it faces rising pressures from an ageing population, pay, addressing the backlog, and ongoing COVID costs. 

‘And if other parts of the system – especially social care and community care – are also struggling with cost pressures, this makes it harder to deliver health care and the 2% will buy less.

‘Efficiency can only take the NHS so far. As Health Foundation analysis this week showed, since 2010, if we had kept up with German health spending we’d have spent £73 billion more each year, and £40 billion more if we’d kept up with France. 

‘Without greater recognition that our health is our wealth – and vice-versa – and a greater focus on its long-term financial sustainability, the NHS is likely to remain on a crisis footing, with difficult trade-offs like performance and rising waiting lists for the foreseeable future.’

Media contact

Ash Singleton
Head of External Affairs
ash.singleton@health.org.uk
07806 555 872

Notes

*Inflation is calculated by HM Treasury using the ‘GDP deflator’ - which looks at inflation specifically for government spending. The GDP deflator does not assess health spending specifically and as health costs are in reality higher (for instance due to pay and construction costs), the actual impact of inflation is likely to be worse than anticipated.