Health care funding

Three key questions about funding in England

The Department for Health and Social Care’s overall budget (known as DHSC TDEL) is funding allocated for the NHS’s day-to-day running costs, education and training of current and future health staff, local government public health services and health care capital investment in England.

This budget is £185.1bn in 2022/23. The Treasury has set planned totals up to 2024/25 when the total health care budget is planned to rise to £193.1bn in cash terms (figure 1). This means that:

• planned total health care spending will increase by £3.1bn (1.7%) in 2023/24, and £4.9bn (2.6%) in 2024/25 in cash terms
• adjusting for inflation, planned total health care spending will decrease by £1.5bn (-0.8%) in 2023/24, and increase again in real terms by £1.9bn (1.0%) in 2024/25.

84% of the health care budget allocated by DHSC to NHS England is to cover the NHS’s day-to-day running costs. Between 2022/23 and 2024/25 this budget will increase by £10.5bn in cash terms, £3.9bn in real terms – an annual average increase of just under £2bn.

The capital budget for health care is £11.2bn in 2022/23 and is planned to increase in cash terms to £12bn and £12.6bn in the following two years. This means the capital budget will be £0.9bn higher in 2024/25, after inflation.  

DHSC total spending is planned to increase by an average of 0.1% a year in real terms between 2022/23 and 2024/25 (figure 3).

This is well below the average seen in the decade preceding the COVID-19 pandemic (2%), the long-term average in England of 3.9% (from 1979/80 to 2019/20) and the long-term UK average of 3.6% since the NHS was founded in 1948 (from 1949/50 to 2019/20).

A range of factors influence the amount of health funding that is needed, including changes in: 

• the size and age structure of the population
• the cost of providing health care services (including staff pay and the cost of drugs)
• productivity and efficiency in delivering health care services.

Figure 4 illustrates the impact of pressures from demographic changes (ie the size and age structure of the population). It shows how real-terms growth in NHS England revenue spending is considerably reduced when adjusted by population size and age.

Based on the latest spending plans, the NHS day-to-day running cost budget (RDEL) in 2024/25 will be almost 80% higher in cash terms compared with 2013/14 levels. However, inflation accounts for half of this increase so real-terms spending will be 40% higher in 2024/25 than in 2013/14.

Health care use also typically increases with age. During this period the population has increased by 7% and more people are above retirement age. Allowing for population increases, spending per person in real terms will be nearly 30% higher in 2024/25 than in 2013/14. Allowing for ageing in the population, it will be around 20% higher in 2024/25 than in 2013/14.

Health spending is increasing but at a lower rate than in the past. Spending growth reflects the rising cost of inputs (inflation) and changes to the population. Funding for the day to day running of the NHS is planned to increase by 1.3% on average in 2023/24 and 2024/25 but capital expenditure is planned to rise by 3.9%. The wider health budget will fall in real terms over that period.