Key points

  • The total budget for the Department of Health and Social Care (DHSC) rose by just 0.6% to £122.8bn in 2016/17. This followed an increase in spending of 2.8% in 2015/16. On average, since the NHS's inception the budget has increased at 3.7% a year.
  • New funding announced in the 2017 Autumn Budget means that 2016/17 will represent one of the lowest annual growth rates in the DHSC budget between 2015/16 and 2020/21 – the period covered by the 2015 comprehensive spending review.
  • The rate of increase in 2016/17 was lower than population growth, so total health care spending in England per person fell in 2016/17.
  • Despite the low funding growth, the DHSC underspent its budget by £635m. This is a small underspend in the context of the total budget – just 0.5% – but is an improvement on 2015/16 when the departmental budget was overspent by £155m.
  • To achieve this, funding was targeted at front-line, day-to-day spending at the expense of longer-term investment.
  • 2016/17 saw the introduction of a new Sustainability and Transformation Fund (STF), provided to NHS trusts by NHS England, subject to agreeing and meeting financial and performance control totals.

Since 2010 the UK government has been committed to reducing the national deficit. While this has meant total government spending on public services in real terms has remained relatively flat since 2010/11, the NHS in England has been relatively protected, with real-terms increases in its budget every year.

However, the budget has grown at a much lower rate than the historical average, or all independent estimates of growth in demand pressures.

2016/17 looked to be more challenging, with total spending per person falling in real terms. Yet the financial position for NHS trusts and commissioners improved, reversing a concerning long-term trend. In this latest report in the Health Foundation’s annual series on NHS finances, we look at some of the ways this improvement was achieved.

Read executive summary

Further reading

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A year of plenty?

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A perfect storm: an impossible climate for NHS providers’ finances?

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This report examines the financial performance of the NHS in England, with the main focus on the...

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Hospital finances and productivity: In a critical condition?

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In this report we examine the financial performance of NHS providers, focusing on hospitals.

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