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Challenges for the NHS

Press release
The recent Budget announced that the National Health Service would receive four years of substantial real increases in spending. Last week the Secretary of State for Health, Alan Milburn, launched a period of public consultation into reforming the NHS to ensure that increases in patient care are delivered.

A new report carried out by the Institute for Fiscal Studies, and financed by the King's Fund, considers some of the challenges that the NHS faces. The findings of this new research include:

  • The spending plans in context. Although not unprecedented, the spending increases announced in the Budget mean that the NHS is now in a period of sustained and relatively high spending growth. Planned average increases of 6.1 per cent per year over the next four years are substantially higher than the average funding increases seen in recent parliaments and over the history of the NHS.
  • International comparisons of healthcare systems. The UK system of healthcare, in which the NHS is mostly financed through taxation, and services are publicly provided, is fairly unusual. Other countries have different systems, ranging from the social insurance models, adopted by France and Germany, to more private sector oriented systems, seen in Switzerland and the United States. It is also true that levels of spending vary dramatically. The UK devotes just 6.8 per cent of national income to healthcare - less than any of the other G7 countries. Comparisons of health outcomes are less clear. The UK performs relatively badly compared to other G7 countries on measures such as infant mortality and life expectancy, but it does perform better than the US, which spends almost 14 per cent of GDP on healthcare. On other measures of quality such as cancer survival rates, the UK performs poorly compared to both Europe and the US.
  • Waiting lists and waiting times in the NHS. While there is no single indicator of NHS performance, it is clear that the public, media and politicians tend to focus on waiting lists and waiting times as one measure of quality. The government looks set to achieve its manifesto commitment of reducing waiting lists by 100,000 over the course of the parliament. It is still the case that at the next election waiting lists will be very high by historical standards. On average, patients have to wait over 4 months for treatment.
  • Variations in performance both across and within regions. The government has stated that at least some of the additional money announced in the Budget will be used to reduce inequalities in the provision of healthcare. While there will always be some differences in quality of care, it is clear that the current levels of variation are substantial. For example, death rates within 30 days of surgery after non-emergency admissions to hospital vary enormously both between regions and between health authorities. The authors suggest that, in some cases at least, these differences are not the result of the inefficient use of resources. For example, some regions with relatively high numbers of people waiting for treatment per hospital bed actually treat more patients per bed year.
  • The impact of an ageing population. The authors' baseline forecasts suggest that, simply due to the growth of the elderly population and other demographic changes, NHS spending will have to increase by some 30 per cent over the next fifty years. This is less than the expected increase in GDP over the period. It is also true that such costs are similar to those already borne by the NHS to pay for the demographic change which has taken place over the last fifty years. Taken alone such costs should not present an overwhelming burden on NHS resources, but there will also be other pressures on the NHS budget, for example from wage increases in the economy and the cost of new treatments.
  • The role of the private sector. Substantial growth in private healthcare over the last twenty years means that the NHS is no longer the sole provider of healthcare in the UK. Nearly 7 million individuals are now covered by private medical insurance, and many people also pay directly for private treatment. The research provides an extensive analysis of the characteristics of those with private medical insurance using data from the Family Resources Survey, showing that those covered tend to be higher-income individuals with managerial or professional jobs. While it is true that any future growth in the private sector will help free up public spending within the National Health Service, the authors show that it is extremely unlikely that any subsidy to encourage individuals to take out private medical insurance would be self-financing.

Alissa Goodman, one of the authors of the report, said "The NHS spending increases announced in the recent Budget are indeed substantial. Providing the improvement in patient care that is expected by the public will be far from easy. Waiting lists are still high and substantial variations in quality of healthcare exist across the country."

King's Fund chief executive Rabbi Julia Neuberger said, "This IFS report is an important contribution to the current debate about the future of the NHS. It shows that, despite recent claims to the contrary, the NHS should be able to afford to support an ageing population. However it also shows that there are tough choices ahead and that the NHS must now improve standards of care if it is to provide the service of choice to those who can afford private health care."


Notes to editors

  1. "Pressures in UK Healthcare: Challenges for the NHS", by Carl Emmerson, Christine Frayne and Alissa Goodman is published on 18th May 2000. Copies are available from the IFS, 7 Ridgmount Street, London, WC1E 7AE, telephone 020 7291 4800 or e-mail, price ò5 (ñ5 to IFS members).
  2. The publication and slides from the conference will be available free of charge from the IFS website at
  3. The publication will be launched at the King's Fund, 11-13 Cavendish Square, London. For more details contact the IFS press office on 020 7291 4800 or e-mail
  4. The research was partly funded by the King's Fund. Co-funding was provided by the Economic and Social Research Council as part of the research programme of the ESRC Centre for the Microeconomic Analysis of Fiscal Policy at the IFS.