Spending commitments made by the Labour and Conservative parties not to cut NHS spending in real terms from 2011 onwards would inevitably result in hard decisions such as cuts to other departments’ budgets or further tax-raising measures over the period to 2017, according to a major new analysis published by The King’s Fund and Institute for Fiscal Studies (IFS).
Report co-author John Appleby, chief economist at The King’s Fund, said: “Our analysis shows that the NHS is facing the most significant financial challenge in its history. “Both the Labour and Conservative parties have pledged to avoid cutting NHS spending in real terms from 2011 but this will come at a big price – whether in departmental cuts elsewhere or tax hikes. “The NHS has enjoyed unprecedented increases in funding since the turn of the century but those days will soon be over. That’s why it’s crucial that the service does all it can over the next two years to prepare itself for the financial freeze that will take hold over the two coming spending review periods.” The report analyses the implications these funding levels would have on the nation’s health and concludes that future funding is likely to fall short of the population’s health care needs. Sir Derek Wanless’s 2002 estimates of future funding needs for the NHS assumed improvements in health-related lifestyle behaviour and increased NHS productivity. However, The King’s Fund and IFS’ three funding scenarios fall short of Wanless’s midrange (“solid progress”) funding projections by between £6.4 billion and £32.4 billion by 2016/17 at today’s prices – between 6% and 31% of the entire NHS budget. This gap in funding could, in principle, be filled by increasing NHS productivity. To do this, over the whole period from 2011/12–2016/17, the NHS would need to make gains of between £23.5 bn (£3.9 bn per year) and £48.9 bn (£8.2 bn per year). This is equivalent to improvements of 3.7% to 7.7 % per year. To put this in context, private sector productivity growth averages around 2% a year, while the Office for National Statistics estimates average NHS productivity between 1997 and 2007 has fallen each year by 0.4% on average. The King’s Fund’s chief executive Niall Dickson added: “The scale of what is about to hit the healthcare system is unprecedented. If, as seems likely, the NHS will have at least three or four years of low or zero growth that will be the first time in it history that it has had to go for such a long period with rising demand and little or no new money. “It would be a grave mistake to underestimate the challenge ahead. There is an opportunity now to improve efficiency but, if the NHS doesn’t tackle this head on, we will once again see the vultures circling – questioning whether we can sustain a free comprehensive system funded out of general taxation.”
