NHS funding shortfall set to widen while social care financing 'unsustainable', new report reveals

A new report launched today (Wednesday 18 November) by the Health Foundation, reveals how the scale of the financial challenge facing the NHS is set to worsen over the next 15 years, and also brings into significant doubt the sustainability of adult social care funding.

Filling the gap: Tax and fiscal options for a sustainable UK health and social care system, highlights that despite the government’s commitment to an additional £8bn towards the NHS there is likely to be a shortfall of £2bn in 2020/21, rising to £9bn (above inflation) by 2030/31. The analysis suggests that even with pay restraint and historically high productivity gains the NHS will need additional funding over the next 15 years. If pay pressures increase or productivity dips the funding shortfall will be even larger.

For adult social care the pressures are even greater, with a predicted funding shortfall of £6bn by 2020/21, rising to £13bn in 2030/31, assuming there is no change in policy.

The projected NHS funding gap of £9bn in 2030/31 is worth 5% of the expected health budget that year; the adult social care funding gap of £13bn is equivalent to 62% of the total expected budget for 2030/31.

The report models a number of options for reducing the shortfall, including:

• The projection of a £9bn NHS funding gap by 2030/31 is equivalent to around an extra 1p in every £1 on both the basic and higher rates of income tax, or more than 1p on both the standard and higher rates of employee National Insurance contributions, or increasing the standard rate of VAT from 20% to over 21%.
• For adult social care, the projected shortfall of £6bn in 2020/21 rising to £13bn by 2030/31 is equivalent to an extra 2p in every £1 on the basic rate of income tax, or increasing the standard rate of VAT to almost 22%.
• If VAT on sugary products was increased to raise prices by 10-20% - in line with Public Health England’s recommendation of what increase is necessary to change people’s behaviour – it could generate between £2.6 - £4.7 billion in 2030/31.
• The government has committed to eliminating the deficit in the national budget by 2019/20 and is planning to run a surplus of £10.5bn (0.5% of GDP) by 2020/21. If the planned fiscal surplus of 0.5% of GDP was spent on health and adult social care, it would close the combined funding gap in 2020/21, but leave an estimated shortfall of £8.4bn in 2030/31.
• Just focussing on health, the forecast fiscal surplus in 2030/31 (£13.3bn) would meet the projected NHS funding shortfall.

Anita Charlesworth, Chief Economist at the Health Foundation, comments: 'Our analysis suggests that the NHS faces considerable pressures but it does not appear unsustainable. As a society it is likely that we will need to provide some additional funding to avoid deterioration in the range and quality of services provided. But by international standards the funding increases would be modest and the NHS would remain a comparatively cheap health care system. There must now however be real doubts about the sustainability of the current financing system for adult social care, and there needs to be a fundamental examination of the future of social care funding as a matter of urgency.

'Choices also need to be made about medium to long-term financing for health and social care, one option being to bridge some of the shortfall through a lower public finance surplus than currently planned, another is to increase taxes. These could take the form of increased income tax or National Insurance.  But there are economic and health reasons to seriously examine the role of ‘sin-taxes’ such as a sugar tax aimed at reducing consumption of goods that can harm our health but that can also help fund rising pressure on the health system.  These solutions are about maintaining the current services that we have, not addressing known weaknesses such as access to mental health care.

'The outlook for social care is bleak with many more people likely to be living unsupported in silent misery if the funding status quo prevails, as well as additional pressure being placed on health services as a result.'

Although the NHS funding gap in 2030/31 is a large headline figure it is a small share of GDP, the report states. If the anticipated health funding shortfall is filled by 2030/31, the UK would be spending a smaller share of its GDP on publically funded health care than countries such as Germany, France, Denmark, Sweden and the Netherlands were spending in 2012.

Media contact:

Mike Findlay

T: 020 7257 8047

E: mike.findlay@health.org.uk