Warnings NHS faces real terms funding reduction of 1 per cent a year

A leading health think tank has warned the NHS faces a funding gap of £6 billion a year by 2015. The King's Fund says that, contrary to George Osborne’s claim the NHS will get an annual real-terms rise of 0.1 per cent, the NHS will in effect face a reduction of more than 1 per cent a year if it is to maintain existing levels of treatment and cover, given changes in the population.

A leading health think tank has warned the NHS faces a funding gap of £6 billion a year by 2015. The King’s Fund says that, contrary to George Osborne’s claim the NHS will get an annual real-terms rise of 0.1 per cent, the NHS will in effect face a reduction of more than 1 per cent a year if it is to maintain existing levels of treatment and cover, given changes in the population.

Today’s reports say that because the rate of health service inflation – the faster-rising cost of drugs, medical technology and NHS wages – is higher than inflation in the economy as a whole, the NHS effectively faces a real terms cut in its resources, with pressure on the health service intensifying as the population ages.

In July, The King’s Fund published a paper looking at how to solve the funding and productivity gaps in the NHS; on the impact of the increasing cost of drugs and wages and demographic changes, it said:

“[Sir Derek] Wanless also made assumptions about increases in pay (a 2.5 per cent real pay increase over and above inflation) and the prices paid for products such as medicines. These pay and price increases account for £3.5 billion, or 17 per cent of the total growth over the three-year period to 2013/14.

“The remaining 25 per cent is accounted for by the estimated costs of making improvements in waiting times, clinical governance and capital, together with meeting higher demand for health care services arising from drivers such as demographic change and the population’s anticipated health-seeking behaviours.”

John Appleby, chief economist at The King’s Fund, today said the shortfall would represent a 5 to 6 per cent reduction in funding, adding:

Waiting times will go up, and NHS management may end up telling ministers ‘we simply cannot do the job, given our resources’. The funding gap in the NHS could rise to as much £6bn a year over the next five years, just in terms of what the service needs to keep up with existing demands and to maintain existing standards…

“Longer waiting times are one of the ways that hospitals and trusts can deal with the shortage of funding to meet needs. This has been made easier to do for management by the Government’s decision to relax or abandon many of the targets set by the previous government. These would include the maximum wait to see a GP, the A&E waiting time and 18-week in-patient treatment limit.”


Also today, Philip Stephens, writing in the Financial Times, described the government’s planned NHS reforms as “an accident waiting to happen”. He wrote:

“For David Cameron’s Conservatives it also makes sound political sense for the coalition to spare the health service the sharpest edge of the Treasury axe…

“All of which makes it puzzling – downright baffling more accurately – that the government proposes to subject the NHS to the most radical overhaul in its 60-year history. In opposition, Mr Cameron promised to call a halt to the merry-go-round of organisational change. His coalition agreement with Nick Clegg’s Liberal Democrats reaffirmed the pledge.

“Then, out of nowhere, came Andrew Lansley’s plan to turn everything upside down within the space of three or four years. Strategic health authorities are to be abolished, as are primary care trusts, the principal purchasers of healthcare. All hospitals are to be turned into foundation trusts and responsibility for public health is to be transferred to local authorities. The health secretary intends to transfer four-fifths of the £100bn-plus NHS budget to general practitioners.

“The stated purpose of the reforms is to drive self-sustaining improvements in patient care through choice and competition. The package is badly misjudged in timing and substance, however…

“Mr Cameron’s commitment to well-funded healthcare seems incontestable, rooted as it is in the hard personal experience of his own family as well as in political calculation. So it would be an extraordinary and politically expensive irony if, as the consequence of another unnecessary upheaval, the NHS were to slip back into crisis. Mr Lansley’s plan is an accident waiting to happen.”

Last week, Left Foot Forward looked at whether the health budget had actually been cut as a result of the Comprehensive Spending Review (CSR). Table 2.2 of the June Budget showed that the departmental expenditure limit for current spending in the Department of Health would be £101.5 billion – yet Table 1 of the CSR puts the same figure at £98.7 billion. The difference in the figures, a story followed up by the BBC, has not yet been explained by the government.

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13 Responses to “Warnings NHS faces real terms funding reduction of 1 per cent a year”

  1. Hazico_Jo

    RT @leftfootfwd: Warnings NHS faces real terms funding reduction of 1 per cent a year: http://bit.ly/d62iTh writes @shamikdas

  2. David Bishop

    RT @leftfootfwd Warnings NHS faces real terms funding reduction of 1 per cent a year: http://bit.ly/d62iTh writes @shamikdas < the horror

  3. Cllr Krupesh Hirani

    RT @leftfootfwd: Warnings NHS faces real terms funding cuts http://bit.ly/9wfrcx

  4. vi__sa

    Good – 1% is nothing!!! Surely they can find a way to be more efficient and make up for the 1% reduction!!

  5. harry potter

    stop paying locums to fly over from germany on £1000 a day who only go on to slaughter their patients anyway.

  6. Andy Sutherland

    RT @leftfootfwd: Warnings NHS faces real terms funding reduction of 1 per cent a year: http://bit.ly/d62iTh writes @shamikdas

  7. Stephen W

    “a 2.5 per cent real pay increase over and above inflation”
    And why the hell would we assume that?

    So making a variety of bogus assumptions to give a considerably higher figure for “health service inflation” than real inflation then we can massage the figures to give a good headline for this blog.

    Get real. Start trying to actually argue against government policy rather than use statistical trickery to make your points for you.

  8. Wendy Maddox

    RT @leftfootfwd: Warnings NHS faces real terms funding reduction of 1 per cent a year: http://bit.ly/d62iTh writes @shamikdas

  9. Kevin Richards

    Not only are they dismantling it, they will starve it of cash-RT @leftfootfwd: NHS faces real terms funding reduction http://bit.ly/9wfrcx

  10. Russell Mayne

    RT @leftfootfwd: Warnings NHS faces real terms funding reduction of 1 per cent a year: http://bit.ly/d62iTh writes @shamikdas

  11. william

    Recently,Ihave had cause to be treated in 4 major London hospitals.The sheer scale of waste caused by their vanity designed buildings defies belief. What you say to one doctor does not appear on the next doctor’s screen. The NHS is the most wastteful organisation ever created.

  12. Mr. Sensible

    I just find it extraordinary that a government who said no reorganizations of the NHS is doing just that.

  13. Northern Ireland’s cuts double whammy | Left Foot Forward

    […] further evidence that the coalition’s claims the NHS budget is ring fenced are questionable at best, Northern Ireland health minister, Michael McGimpsey, has warned that without protection […]

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