This is first of three Health Foundation briefings ahead of the 2017 General Election.
Labour’s pledge today to invest over £30bn in the English NHS would result in an immediate £7.4bn upfront cash boost for the health service, which would include an extra £2bn a year for capital investment. But it would leave a funding gap of £7bn by 2020/21, according to analysis from independent charity the Health Foundation.
The funding would be higher than the government’s existing plans up to 2020/21, and would mean health care spending reaching £134bn in 2020/21, from £123.7bn this year (17/18 prices). This would match the minimum recommendations from the House of Lords’ Select Committee on the Long-Term Sustainability of the NHS, which called for health care funding to increase at least in line with GDP growth. Under Labour’s plans, health care spending as a share of GDP would increase slightly from 7.3% in 2016/17 to 7.4% in 2020/21.
For the rest of this decade, Labour’s proposals for NHS funding would amount to an average increase of 2.2% a year in real terms funding (when accounting for inflation). By comparison the coalition government’s funding for the NHS increased by an average of 1.2% a year from 2009/10 to 2014/15. This compares with annual NHS funding growth of an average of nearly 4% a year in its first 70 years. The Labour funding pledge is around half the independent Office for Budget Responsibility’s (OBR) projection of funding pressures on the service – over 4% a year above inflation.
In our recent briefing NHS and social care funding: three unavoidable challenges, the Health Foundation outlined that the pace of funding growth for the NHS will need to accelerate, taking a greater share of GDP. This will be necessary to keep pace with a growing and ageing population, rising chronic disease levels, as well as to meet public expectations for health care and fund new technologies and medical advances.
The Labour funding pledge would be very unlikely to meet growing demands (based on the most recent OBR projections) on the service or fund additional pay increases. To protect the quality of patient care would require continuation of the current requirement for the NHS to achieve average efficiency improvements of 2-3% a year. York University shows that the recent rate of improvement was below this at an average of 1.7% a year between 2009/10 and 2014/15.
Anita Charlesworth, Director of Research and Economics at the Health Foundation, said:
‘The Labour manifesto proposes an immediate injection of significant extra funding into the NHS; £7.4bn extra this year. But for the remainder of the decade, the proposals for NHS funding would amount to an average increase of 2.2% a year when accounting for inflation. Under Labour’s manifesto plans, health care funding would not match the demand and cost pressures on the health service, which the independent OBR estimates at more than 4% a year above inflation. A £7bn funding gap by 2020/21 would require the NHS to continue to deliver major efficiency savings if quality and access to services are to be protected.
‘This is a stark reminder of the task ahead if England is to secure a sustainable NHS. The health care service needs additional funding now, but to be sustainable it needs more than one-off injections of extra money. With an ageing and growing population, new technologies and significant workforce pressures the NHS will need funding to grow year in, year out.’
Notes to editors
- The OBR uses current government spending plans rolled forward to 2021/22, then model estimated spending pressures rising by an average 4.4% a year between 2021/22 and 2031/32. We have applied this 4.4% projected increase for the years of the next parliament, rather than current spending plans, to estimate underlying funding pressures.
- All financial data have been adjusted to 2017/18 prices using HM Treasury gross domestic product (GDP) deflators – a whole economy measure of inflation as of March 2017.
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