What are the funding projections for the English NHS over the coming years?

This overview accompanies our briefing NHS finances: the challenge all political parties need to face.

Key points

Each year, the English NHS faces additional spending pressures of around 4% in real terms. These are the result of a growing and ageing population, the increasing prevalence of long-term conditions, higher expectations of care and rises in the relative prices of health care inputs (principally of staffing).

These pressures will result in a potential funding gap of £30bn by 2020/21 unless additional funding is made available or substantial productivity savings are made.

NHS England suggests that this potential £30bn funding gap can be reduced through further productivity savings as follows:

  • productivitygrowth of 0.8% a year could bring the gap down to £21bn
  • productivity growth of 1.5% a year could bring it down to £16bn
  • productivity growth of 2.0%–3.0% a year could bring it down to £8bn.

The funding gap for 2020/21 will be closed if public funding for health rises by 1.5% a year in real terms and the NHS achieves a rate of productivity growth of 2–3% a year. However, this is substantially higher than the recent rate of acute productivity growth.

The period between 2010/11 and 2020/21 will be the most financially austere decade in NHS history, even if funding rises by 1.5% a year in real terms from 2014/15 onwards, in line with NHS England’s Five year forward view. This would result in an average increase of 1.4% a year in real terms over the decade from 2010/11 to 2020/21. During the last 50 years, the lowest average funding increase over a ten-year period has been 2.0% a year, between 1975/76 and 1985/86.

Spending pressures will continue beyond the next parliament. Pressures on the English NHS are projected to be £65bn higher than current spend by 2030/31 (in 2014/15 prices), assuming that the English NHS continues its current rate of productivity growth of 1.5% a year (from 2004/05 to 2011/12). Meeting this demand would require additional funding of 2.9% a year above inflation between 2014/15 and 2030/31, and would see the English NHS take a growing share of total national GDP.

Funding pressures on the English NHS are substantial, but not unique. The OECD estimates that public spending on health will grow at a faster rate in 11 of the other EU-15 countries than in the UK.
 

Further reading

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