OBR inflation figures mean budget cuts for health and schools

New inflation estimates by the OBR mean that the NHS and schools budget will fall in real terms over the spending review period. The Government had promised promised a 0.4 per cent increase in NHS funding.

New estimates of inflation by the Office for Budget Responsibility mean that the NHS and schools budget will fall in real terms over the spending review period. The Government had promised a 0.4 per cent increase in NHS funding over the spending review period and year-on-year increases in the schools budget.

The OBR forecast on 29 November (Table 3.6) predicted higher inflation than in its June 2010 forecast (Table C2). This means inflation is set to be at a higher level than the cash increases in NHS funding. New analysis by the House of Commons Library show the real terms cut.

In an exchange with John Healey in the Commons yesterday, Health Secretary Andrew Lansley denied that there was a real terms cut:

“No I don’t accept that for a minute. At the Spending Review we set out what met our commitment. I am very clear – I just told him – that revenue funding for the NHS will increase in real terms and it will do so because we did not listen to the advice of that party opposite, which in the run up to the Spending Review was to cut the NHS budget.

We didn’t do that, we were committed at the Spending Review to an increase in real terms. The GDP deflator will move from time to time but the commitment we set out was clear and will continue.”

Labour’s Health spokesman, John Healey, said today:

“This is hard proof that the Government is breaking its promise to protect NHS funding.”

“Andrew Lansley needs to come clean and explain to the public why the government has broken the promises it made on the NHS – promises that were at the heart of the Tory election, central to the Coalition Agreement and repeated at the Spending Review.”

The Spending Review also promised a real terms increase of 0.1 per cent in each year of the Spending Review for the 5 to 16s school budget. This will also become a cut over the spending review period if the OBR’s new forecasts prove correct.

Update 16.40

Last nights Channel 4 analysis of NHS funding using the latest predictions from the Office for Budget Responsibility has corroborated Left Foot Forwards findings, confirming:

“what looked like a tiny real-terms rise in NHS spending now looks like a tiny real-terms cut.”

Therefore there is no certainty that there will be a real-terms funding increase in Government spending on the NHS.

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