© Nuffield Trust

UK Health Spending, government spending and tax 1978-79 to 2016-17

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 390.0

10.0

20.0

30.0

40.0

50.0

60.0

health other public services welfare and debt interest tax receipts

© Nuffield Trust

The magic circle: health spending increases rapidly, overall public spending and tax falls

In 2016-17 spending as a share of GDP and receipts as a share of GDP will be at the average for the 20 years pre-crisis (40% and 38%).

2 key differences: Health spending will be much larger (2 percentage points of GDP) and spending on other public services will be at the share last seen in at the end of 1990’s.

Share of GDP

Total Public Spending

Healthspending

Other public services

Welfare and debt interest

Receipts

1978-79 45.1% 4.4% 25.9% 14.7% 40.1%

2007-08 40.7% 7.1% 20.3% 13.2% 38.6%

Difference - 4.4 +2.7 -5.6 -1.5 -1.5

Source: OBR, HMT PESA 2012

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The impact on aggregate public spending

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Closing £13 billion Funding Gap: 2010/11 to 2014/15

2010/11 2011/12 2012/13 2013/14 2014/15 £85,000

£90,000

£95,000

£100,000

£105,000 Funding pressures on the NHS in England

Funding pressures after for pay restaint

Funding pressures after pay restraint and managing hospital activity for chronic condi-tions

Funding pressures after pay restraint, manag-ing hospital activity for chronic conditions, and productivity savings

Funding allocation based on 2010 spending review

Year

Fu

nd

ing

(£b

illi

on

in

201

0/11

pri

ces) Pay reduc-

tion:£5bn

Disease management:£3bn

Acute QIPPActions: £4bn

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Initial Progress in 2011-12?

  Expected Actual Difference

Emergency Admissions trend 5,784,376 5,411,015 -7%

Emergency Admissions with QIPP actions 5,648,234 5,411,015 -4%

Emergency Bed Days trend 39,639,520 35,600,921 -11%

Emergency Bed Days with QIPP actions 37,352,528 35,600,921 -5%

Planned Admissions trend 8,766,957 8,735,584 0%

Modelled Planned Bed Days 16,747,173 16,555,415 -1%

Planned Bed Days with QIPP actions 16,159,549 16,555,415 2%

OP Appointments 67,079,975 72,799,662 8%

OP Appointments with QIPP actions 62,572,388 72,799,662 14%

A&E Attendances trend 15,503,662 17,602,055 12%

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Variation in labour productivity at selected providers in England: 2006/07 to 2011/12

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Percentage changes in spending by type of care: 2010/11 to 2011/12

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Closing £11 billion Funding Gap: 2014/15 to 2017/18

2014/15 2015/16 2016/17 2017/18 £85,000

£90,000

£95,000

£100,000

£105,000 Funding pressures after pay restraint, managing hospital activity for chronic conditions, and produc -tivity savings

Funding pressure after releasing all semi-fixed costs from QIPP

Funding pressures after releasing all semi-fixed costs from QIPP, and management of activity for chronic conditions

Funding pressures after releasing all semi-fixed costs from QIPP, management of activity for chronic conditions, and extension of pay restraint

Flat Real

Year

Fu

nd

ing

(£b

illi

on

in

201

0/11

pri

ces) Releasing semi-fixed

costs: £2bn

Disease Management:£2bn

Continued PayRestraint: £3bn

Remaining Gap:£3bn

© Nuffield Trust

Earnings will be key

2011 2012 2013 2014 2015 2016 2017

Nominal average earnings growth

2.2 2.7 2.2 2.8 3.7 4.0 4.0

GDP deflator

2.7 2.3 2.0 2.0 2.0 2.0 2.0

Nominal NHS pay bill per head growth

1.7 1.7 2.5 2.5 ? ? ?

Source: OBR 2012, NHS employers 2012

© Nuffield Trust

Conclusions

• From 2010/11 to 2014/15 the NHS faces its tightest budget of last 50 years.

• This period of austerity is likely to extend at least until 2017-18.

• Only a even larger cut in other public services or welfare or relatively large tax increases would allow NHS funding to grow at historic levels. 1p extra on income tax raises around £4 billion a year.

• Without unprecedented productivity gains, there is likely to be a rapid growth in the gap between the demand for care and the ability to provide high-quality services.

• Although the NHS is delivering headline savings its not clear that it is making the necessary progress on service productivity and models of care.

• The scale of workforce cost growth after 2015 will be crucial.