In this briefing we explore what the UK leaving the EU might mean for funding of the NHS in England. We then outline the current state of finances for NHS providers in 2015/16, what this implies for the total Department of Health budget, and the scale of the financial challenge facing the health service for the near future.
Our analysis builds on the work of the National Institute of Economic and Social Research (NIESR) and the Institute for Fiscal Studies (IFS), and finds that there are significant risks to NHS funding.
The NHS in England is already facing its worst ever financial challenge, following an unprecedented squeeze on funding for health and social care. At the end of the last financial year, health care providers reported a £2.5bn deficit, as 65% struggled to balance their books.
Factors including an ageing population and an increase in prevalence of chronic conditions mean that funding pressures are set to rise by around 4% a year over the next decade. The Health Foundation projects that the NHS will face a funding shortfall of at least £16bn by 2030/31, even before considering the impact of leaving the EU.
Leading economists are almost unanimous in concluding that leaving the EU will have a negative effect on the UK economy, which in turn will impact on public spending. This report concludes that it is difficult to see how the NHS can escape the consequences.
The NHS budget could be £2.8bn lower than currently planned in 2019/20, if the government aims to balance the books overall. In the longer term, the NHS funding shortfall could be at least £19bn by 2030/31– equivalent to £365m a week – assuming the UK is able to join the European Economic Area. If this is not the case, the shortfall will potentially be as high as £28bn – which is £540m a week.
There has been much discussion of additional funding for the NHS as a result of the UK leaving the EU. The Health Foundation’s analysis finds that if economic growth slows as predicted, funding no longer being paid to the EU would be more than cancelled out by the negative economic consequences of leaving. Therefore if the NHS were to receive an extra £100m a week from 2019/20, this would require: increased taxation of around 1p on the rate of income tax; adding £5.2bn to the expected public finance deficit; or making further cuts to other areas of public spending.