Chancellor needs to uplift Departmental budget by at least 3.6% just for NHS to “stand still”

The NHS in England is heading for an unfunded overspend of £4.8bn this financial year, meaning that the Chancellor will need to grow the overall health budget by at least 3.6% just to manage current day-to-day cost pressures, the Nuffield Trust has claimed.  
 
The analysis comes in a briefing looking at the fine print of NHS spending commitments and the impact of transfers from the Department of Health and Social Care budget to that of NHS England. It reveals that even by July, the day-to-day running costs of the NHS had already required the budget to be boosted by a further £7bn in transfers from the Department, in addition to the £165bn spending envelope set for it in the March Budget earlier this year. 

These transfers will put pressure on the department’s other responsibilities, including health care infrastructure, buildings and technology, public health and adult social care, that were not protected from real-terms cuts under an artificial distinction made by the previous government between “NHS” and non-NHS health spending.

Despite these in-year transfers, the analysis explains that the NHS will need a further £4.8bn for this year to cover the higher rate at which NHS trusts have already been spending, as well as to cover the offer agreed between the government and doctors' unions in July.   
 
Author Sally Gainsbury argues that a lack of transparency affecting NHS accounts is hampering adequate planning and understanding of health service budgets, and calls for an end to the misleading separation between NHS and non-NHS health and social care budgets when funding is announced. This would better recognise that investment in public health, health care infrastructure, social care and the NHS are all interdependent.

The analysis finds that:

• The NHS England budget published in the March Budget was set at a rate significantly below the speed of population growth and the level of patient need, meaning in-year top-ups have been needed to shore up day-to-day services.  
• By the end of July, NHS trusts were spending 4.6% more in real terms each month than in 2023/24 to manage growing need. 
• Taken together with the impact of pay settlements and the cost of pensions uplifts, these cost pressures mean day-to-day spending by NHS England will this year be £12.9bn higher than in 2023/24, of which £4.8bn is not currently covered by NHS England or DHSC budgets.
• Fully funding that without further cuts to DHSC’s unprotected budgets would require a real-terms headline increase to DHSC’s 2023/24 revenue budget as set out in the March red book of 3.6% (including the additional cost of the Treasury’s pension rate) to £186.4bn, with more needed if transfers already made are going to be compensated. 
   

Commenting on the analysis, Sally Gainsbury, Senior Policy Analyst at the Nuffield Trust said: “This year, largely driven by an inadequate budget settlement in March, the NHS has already had to receive top-ups from the DHSC budget, just to keep day-to-day services running. But even with those top-ups, the NHS is heading for a significant overspend this year unless eye-wateringly high and historically unprecedented efficiency savings can be made.  

“At a time of extremely tight public finances, it would be tempting to hope that a large funding increase next Wednesday could deliver the reforms needed to improve the NHS for the future. But this is a service that is running to stand still. If it is overspent to the tune of £4.8bn at the end of this financial year, this will likely mean further cuts to non-NHS budgets like public health and technology, achieving the very opposite of the laudable aims to prioritise improvements in these areas, announced for the government’s ten-year plan.”