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What does the NHS funding announcement mean for health spending in England?


The settlement announced yesterday for NHS England implies real spending increases of 3.4% a year for day-to-day spending on the NHS in England. Importantly it does not cover spending on capital equipment, buildings or medical training. Capital spending in the NHS has been squeezed sharply since 2009-10, and the long term efficiency of the NHS will depend on adequate funding in these areas. We await details of what will happen to these aspects of spending.

In addition there will have to be decisions over the allocation of NHS spending. In recent years, despite rhetoric in favour of funding public health and primary care, any additional funding available has gone into the hospital sector. Spending on primary care has actually fallen, and while numbers of hospital doctors have increased, GP numbers have decreased. NHS England will want to find ways to ensure that not all of the additional money is swallowed up in the acute sector and that some is funnelled into primary care

Yesterday we heard the first details of a new five-year funding settlement for the NHS in England.  It was announced NHS England funding would be slightly more than £20 billion higher in 2023-24 than in 2018–19 after adjusting for forecast economy-wide inflation over the period.  This would provide an average annual real increase of 3.4% for frontline services in England, and would also provide additional money for health in Scotland, Wales and Northern Ireland.

This represents a larger increase in funding for the NHS than we have seen in the last 8 years, but remains below historical average growth in UK health spending (3.7% per year).

It is also important to note what this money covers and what it doesn’t.  The annual 3.4% increases apply only to the NHS England budget, and not to the wider Department of Health budget, the traditional (and broader) measure of public spending on health in England.

The NHS England budget covers most of day-to-day spending on providing healthcare services in England.  That is, the money used by hospitals and other providers to pay for providing care to patients. In 2017–18, NHS England spending was £111.5 billion (2018–19 prices), or 88% of the £126.6 billion spent by the Department of Health in total. 

But this money does not include spending on things like capital spending (e.g. investments in hospital buildings and medical equipment), public health initiatives, medical research, or training for medical staff.  Investments in these areas today, alongside spending on other related services such as social care (which was not mentioned yesterday), may help to provide better and more cost-effective NHS care in future.

As yet, it is unclear what will happen to spending on these areas in England. The 2015 Spending Review plans implied large cuts for non-NHS health spending: reductions of 20.9% between 2014–15 and 2020–21, with much of these cuts already taking place prior to 2018–19.  Even if spending in this area was now frozen in line with inflation over the 5 year period, the overall increases in health spending would be more like 3% a year than the announced 3.4%.  Further cuts to these areas would imply even lower growth.

It also remains to be seen where NHS England will choose to spend their additional money. While hospitals have struggled to meet a number of high profile targets in recent years, there is an increasing worry that primary and community care is struggling to cope.  Between 2010–11 and 2016-17, spending on primary care was cut by 4% while overall DH spending increased. Complete details of where this money will be spent are yet to be announced, but it is clear that despite the increase in funding announced yesterday the NHS continues to face tough choices as to where it spends its budget.

Find out more

Recent IFS work (joint with the Health Foundation) documented the considerable pressures on health and social care spending over the next fifteen years. In the near term, an announced funding settlement for the NHS covering the next few years may be on the horizon.
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