3. How have trends in health care capital spending contributed to the value of total health care capital in the UK?
24 October 2019
So how do these trends in health care capital spending contribute to the total value of capital in health care in the UK?
The chart below shows the changes in the value of capital in health care across European countries between 2000 and 2017, revealing a 3% fall in the value of capital in the UK. Over this period in the UK there were three distinct trends. From 2000 to 2006, the value of health care capital was relatively flat, then from 2007 to 2010 it increased by 8%. This coincides with the large increase in capital spending shown in the previous chart. But since 2010, the value of health care capital has fallen by 11% which has coincided with the decline in health care capital spending.
The data used to calculate capital values in the chart below relate to the net value of fixed assets in ‘human health activities’ and are obtained from Eurostat. This differs slightly from the definition used in the previous section for capital spending in the health care system from the OECD which includes some services considered to be social care in the UK (see note 1 below).
For example, residential care activities are not included in the definition of health care we use to calculate the value of capital. An advantage of this measure is that it offers a closer reflection of the services provided by the NHS. However, this is not necessarily the case for other countries where services such as residential care are considered as health care.
We use Eurostat data for our capital values as the OECD does not provide capital values solely for the health care system, only for ‘health and social work’. As a result, we consider that the Eurostat data provides the best available representation of capital values in health care. As not all countries report the data, we selected all countries with available data, excluding Luxembourg as it is an outlier.
International comparisons are challenging due to the way countries measure and deliver health care, and particularly social care. The values are based on assumptions which may differ between countries, for example, the length of time they expect capital to be used influences how much it depreciates each year.
There could also be price differences in the cost of capital. As the NHS is the single largest health care purchaser in these countries, it could be using its market power to purchase at lower costs. By using within-country indexes from 2000, we can reduce the impact of cross-country differences.
There are also differences in what is considered health and social care between countries.
For all the charts we repeated the analysis using the same data sources but with a broader definition which included all health care and social work. The trends for the UK remained similar. While there was an increase in the value of capital, there were still significant falls in capital per worker as a result of an increase in the workforce, and low levels of capital per worker when adjusted for exchange rates.
The analysis suggests that the UK’s health care capital spending is mostly focused on replacing existing capital as it deteriorates, while other countries are replacing capital at a faster rate than they are using it, leading to large increases in their health care capital stock.
- Under standard industry classifications, the health data we use is industry 86 human health activities. For comparison, we also estimate capital stocks using health and social work industries, which is industries 87 and 88.
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