Health spending planned to fall in England and Scotland in 2024–25, suggesting a top-up likely

This comment has been updated to reflect new information from the Welsh Government since it was originally published. It originally said that “It is not clear what the Welsh Government assumes about proceeds from this [immigration health] surcharge”, reflecting the lack of information in Welsh Government documentation on this funding stream. The Welsh Government have since provided us with information, which is now accounted for below.   

The UK government, Scottish Government and Welsh Government have each now published their final updated budgets for the current financial year, 2023–24 (see here, here and here), confirming sizeable top-ups to health spending. New analysis by IFS researchers of these updated budgets and published spending plans for 2024–25 shows that, as a result, health spending is currently budgeted to fall in real terms in the coming financial year in both England and Scotland but increase modestly in Wales.

Currently planned spending in 2024–25 will almost certainly need to be topped up if cuts to staffing and service provision are to be avoided. This is particularly true for England, where existing plans entail real-terms cuts of around 1.2% in day-to-day spending – the largest reduction since the 1970s (following the 1976 IMF crisis), except for the last two years as temporary funding related to the COVID-19 pandemic has expired.

Holding back funding in reserve, as the UK government is currently doing, and then potentially making in-year top-ups during the course of the year can provide more flexibility to respond to changing circumstances. However, given the evident pressures on the NHS, it is almost certain that health spending will be topped up significantly again during 2024–25. Leaving it until near the end of the year to confirm this, as has been the case in 2023–24, would make it harder than it need be for managers to plan the efficient delivery of care over the year ahead. The Budget this week provides an opportunity to confirm at least some top-up prior to the start of the financial year instead, providing more funding certainty to the English NHS and the Scottish, Welsh (and Northern Irish) Governments.   

IFS researchers have examined both the revised UK, Scottish and Welsh budgets for 2023–24 and published spending plans for 2024–25 to look at the implied year-on-year changes in health spending.

Our analysis is based on the budgets for the UK government’s Department of Health and Social Care (which covers England), the Scottish Government’s NHS Recovery, Health and Social Care portfolio, and the Welsh Government’s Health and Social Care main expenditure group. The set of responsibilities under these budget headings are not perfectly aligned (more social care spending is included in Scotland and Wales than in England, for example). But they are broadly comparable, with spending on the NHS and public health services making up the vast majority of the budgets in each country.

Bearing this in mind, our analysis of these budgets in 2023–24 and 2024–24 finds that:

• There have been sizeable in-year top-ups to initial health budgets in each country in 2023–24, largely to cover the costs of pay deals as well as ongoing pressures on NHS services. The top-ups amount to £4.4 billion in England, £605 million in Scotland and £629 million in Wales compared with initial budgets. This is equivalent to a 2.5% (£75 per person) top-up in England, a 3.4% (£110 per person) top-up in Scotland, and a 6.2% (£200 per person) top-up in Wales.
• After accounting for these in-year top-ups, current published plans for health spending in 2024–25 imply a 2.4% real-terms year-on-year cut in England, compared with a 0.75% cut for Scotland and a 0.7% increase for Wales. The Welsh Government plans to pay for this modest increase in health spending (on top of the largest in-year spending top-ups in the current financial year) through big cuts to many other areas of spending. (The figures for England and Wales do not adjust for any additional funding from the immigration health surcharge – see below.)

However, health spending plans for the coming year are likely to be increased again during the course of the year, particularly in England:

• Scotland’s published plans for 2024–25 already include an allowance of £200 million for funding that will be provided during the course of 2024–25 from the proceeds of the immigration health surcharge (a fee paid by short-term immigrants or their employers). However, the UK government’s Department for Health and Social Care budget does not yet include these proceeds which, assuming the same per-person figure as Scotland, would amount to around £2.1 billion for England. Accounting for this surcharge income would reduce the year-on-year real-terms cut in English health spending in 2024–25 that is implied by currently published spending plans to 1.2%. The Welsh Government’s budget also does not yet account for funding from the immigration health surcharge. If the amount per person is the same as being assumed by the Scottish Government, and it was entirely allocated to the Welsh NHS, this would take the year-on-year real-terms increase in health spending in 2024–25 in Wales from 0.7% to 1.8%.
• A real-terms reduction in health spending would require some combination of reductions in staffing, pay and service provision. In contrast, the English NHS long-term workforce plan implies increases in staffing of 4% in 2024, and tackling waiting lists will require an increase in the number of appointments and procedures delivered. It therefore seems highly likely that English health spending will be topped up again in 2024–25 to the tune of several billion pounds.
• Top-ups to English NHS spending will generate additional funding for the Scottish Government and Welsh Government via the Barnett formula. The Scottish Government will highly likely allocate this funding largely to the Scottish health service, given the cuts implied by its current plans. The Welsh Government may have more scope to allocate at least some of any additional funding that becomes available to ease the squeeze on other services that it has currently budgeted for in order to provide its modest boost to health funding.