How much funding does the NHS need over the next decade?

Voters are being offered an array of manifesto pledges to fix the NHS. These include more appointments to bring down waiting times, new hospitals, new diagnostic centres, more GPs, more GP surgeries, new targets to see a GP, more dentist appointments and fewer managers. Shifting care outside hospitals and more prevention, both policy goals in recent years, continue to frame election narratives. The main parties have committed to increasing spending on the NHS, while avoiding rises in income tax, VAT or National Insurance and meeting fiscal rules.

The public understands the severity of the challenges facing the NHS. Satisfaction with the NHS is at a record low and most people believe that more funding is needed. However, understanding whether the billions being pledged are ‘enough’ to solve these challenges is harder. The Health Foundation has analysed the level of funding the NHS will need in the future, as part of a series of long-term projections designed to encourage a more realistic and sustainable approach to NHS funding and workforce policy. The full analysis will be published later in the year. This briefing offers a provisional assessment of the scale of the funding that might be needed for the NHS over the next 10 years in order to inform the general election debate. 

All parts of the NHS are under pressure. Waiting lists for routine hospital care are at near-record levels. The 18-week referral-to-treatment target and the 4-hour target for A&E waiting times have not been met since February 2016 and July 2015 respectively. The proportion of patients reporting a poor experience of getting a GP appointment is higher than ever, despite record numbers of appointments being delivered last year. 

This deterioration in performance follows a decade of low spending growth before the COVID-19 pandemic. Between 2013/14 and 2019/20, annual spending on the NHS in England grew by 2.6% per year in real terms. This is below the long run trend for total health spending. Since 1949/50, government health funding in the UK has grown by 3.6% on average each year in real terms, and by an average of 3.8% per year in England in real terms since the start of the 1980s. Capital investment has been particularly low, with budgets often used to prop up day-to-day spending. 

As a result, the NHS went into the pandemic with chronic staff shortages, insufficient capacity and inadequate buildings, equipment and IT. Since then, it has struggled to increase productivity, and activity in hospitals has not risen in line with recent increases in funding and staff.

We modelled two scenarios of how much funding the NHS might need between 2024/25 and 2034/35 (Table 1). These are not forecasts of what will happen, but are projections of what could take place if all the policies we include are adopted and our assumptions hold true.

For both scenarios, we use trends in the patterns of care delivered since 2010 to project into the future. We also account for a growing and ageing population with more long-term illness. The ONS projects that England's population will increase (from 58 million to 62 million by 2034) with the number of people over 65 rising from 11 million to 13 million in the same period. Our work has found that more than 9 million people will be living with major illness in England by 2040.

Changes in population size and illness are not the only determinants of health care activity. For example, in the decade before the pandemic, hospital-based services such as outpatient and emergency services grew faster than expected relative to changes in the population. So we have also factored in changes over time in the quantity and type of care provided as a result of new technology, treatments and changes in service use. 

The first scenario, which would see sustained improvement, builds in funding to improve services and address the backlog of elective care over a 10-year period. It models a fundamental shift in the NHS to focus on prevention, better management of long-term conditions and caring for more people out of hospital. It also includes uplifts in investment in capital and the public health grant, and pay growth to recover ground lost relative to earnings in the wider economy in order to attract and retain staff.

We assume productivity growth of 0.9% per year (as well as recovery from the pandemic shock). This is above the historic average but below the headline figure from the 2024 Spring Budget, confirmed by NHS England. However, that figure includes catching up the productivity lost during the pandemic and encompasses a wider range of value for money changes, which we capture in other aspects of our sustained improvement scenario. Once these differences are factored in, the two numbers are broadly equivalent. 

The second scenario, which would see minimal change, is based on funding rising to meet demand. This means very little change to the current, hospital-focused, model of care and would not deliver all the care needed to clear the backlog. It also assumes lower investment in capital and the public health grant, lower productivity and that wages keep pace with the wider economy only.

The tables below show the results of the funding projections over a 5-year and 10-year period for both scenarios. Both scenarios assume a higher level of growth in the first five years as the NHS continues to recover from the COVID-19 pandemic. 

TDEL refers to the overall budget for the Department of Health and Social Care. This is made up of RDEL (allocated for the day-to-day running costs of the NHS, the grant to local authorities for public health services, spending on training the health care workforce of the future) and CDEL (the capital allocation). All growth rates are expressed in real terms. 

Two major challenges arise from these projections. The first is the need to confront the trade-offs needed to fund the NHS as well as other essential public services over the medium to long-term, including adult social care. Our sustained improvement scenario projects average real-terms annual funding increases (3.8%) well above the projected rate of growth in the economy (1.9%) and government revenues for public services over the same period (1.6%). Both our scenarios also exceed projected growth based on increasing the health budget in line with the latest assumptions from the Office for Budget Responsibility (0.8% in real terms), as well as the amounts implied by the Conservative and Labour parties in their manifestos (0.9% and 1.1% real terms annual growth over the next parliament, respectively). Real-terms funding growth of 0.8% a year would see the total Department of Health and Social Care budget increase to £197bn in 2029/30. This would leave the health care system in England around £38bn short  in 2029/30 of the spending we project in our sustained improvement scenario. 

The provisional analysis of our projections presented here underlines the difficult choices facing the next government. England is far from alone in facing the challenge of expanding health care to recover from the pandemic and address growing demand and rising costs within a tighter financial context. The OECD projects that across its member countries, the next two decades will see health spending pressures increase by more than inflation and economic growth. This is true whether health systems are primarily funded from taxation or social insurance. 

Our sustained improvement scenario is not overly ambitious. Indeed, it suggests a more cautious timescale for tackling the backlog of hospital care (10 years) than both the main parties have proposed (within 5 years) and incorporates challenging assumptions about improvements in NHS productivity. The changes modelled in this scenario are also broadly in line with the ambitions the main political parties have set out for the NHS and public expectations. Even our minimal change scenario – which would result in little improvement to services and would not be enough to clear the backlog of care – would require spending above the levels implicitly pledged by both the main political parties. 

Addressing the funding required to improve the NHS would mean facing up to difficult trade- offs with the funding needed by other public services and levels of taxation. Honesty about these trade-offs has so far been conspicuous by its absence from a general election debate that has been characterised by a ‘conspiracy of silence’ about the choices on public spending and taxation that will confront the next government. A good first step for whoever crosses the threshold of 10 Downing Street on 5 July would be to level with the public about how much it will cost to meet the challenges facing the NHS and the trade-offs this will require.