The NHS and publicly funded adult social care will account for £157bn of public spending across the UK in 2015/16 – equivalent to 8.4% of gross domestic product (GDP) and accounting for around £1 in every £5 of government spending.
In this report, economists at the Health Foundation and the Institute for Public Policy Research (IPPR) have worked together to explore:
- how spending pressures on health and social care might increase
- the scope for public funding to match these pressures within current fiscal policy to quantify whether there is a potential funding gap for health and social care
- the potential revenue that might be raised by different taxes to fill a health and social care funding gap
- the distributional impact of the different tax options and how they compare to the profile of the ‘beneficiaries’ of additional health and social care spending.
- Our analysis shows that despite government commitments to additional funding for the NHS in the UK, there is still likely to be a shortfall of £2bn in 2020/21, rising to £9bn (above inflation) by 2030/31.
- For adult social care the pressures are greater. We forecast a funding shortfall of £6bn by 2020/21, rising to £13bn in 2030/31, assuming there is no change in policy.
- The projected health funding gap of £9bn in 2030/31 is worth 5% of the projected budget that year; for adult social care the funding gap of £13bn is equivalent to 62% of the total expected budget for 2030/31.
- The combined pressures on health and social care funding will amount to an estimated shortfall of £8bn in 2020/21 and £22bn 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 were 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.
- One alternative to taxing income and employment is to tax consumption and in particular consumption that has a harmful effect on health – a so called ‘sin-tax’. The report looks at taxing sugar specifically.
- There are choices that need to be made about the medium to long term financing of health and adult social care. One option is to bridge some of the gap through a lower public finance surplus than currently planned; another is to increase taxes.
- While our analysis suggests that the NHS faces considerable pressures, it does not appear unsustainable. However, there must now be real doubts about the sustainability of the current financing system for adult social care.
A technical appendix prodiving details of the methods used for this report will be available on this page soon.