IFS: Department of Health funding plans ‘do not keep up with NHS demand’

Written by Richard Johnstone on 31 May 2017 in News
News

Think tank urges next government to focus on finding “long term solution” to health and care funding pressures

Plans put forward by all three main political parties to boost NHS spending in the next parliament will not keep up with increasing demand on the service, according to the Institute for Fiscal Studies.

The think tank’s analysis of Conservative, Labour and the Liberal Democrat spending plans found the pledged increases all fell short of the 4% long-run average increase in NHS spending – and the IFS urged the next government to consider new funding approaches.

Under existing plans from the 2015 Spending Review, the budget of the Department of Health will increase by an average 0.8% per year in real terms between 2017-18 and 2020-21, taking health spending from around £124bn to £127bn.


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Compared to this, the Conservative manifesto has pledged to increase NHS spending by a minimum of £8bn in real terms over the next five years, as well as “delivering an increase in real funding per head of the population for every year of the parliament”.

According to the IFS, this would suggest an increase in DoH spending to £132bn in 2022-23, if spending in all other parts of the ministry were frozen, around a 1.2% real terms annual increase in spending to 2022-23.

Labour has pledged a larger increase in health funding – up by £7.7bn in the current financial year and rising to £8.4bn by 2021-22. This could take DoH spending to around £135bn (in today’s prices) in 2021-22, according to the analysis, an average real terms annual increase of 2.0% to 2021-22.

The Lib Dem pledge to increase health and social care spending by approximately £6bn each year, with around £2bn ring-fenced for social care, implies DH spending of £131bn (in today’s prices) in 2021-22, according to the review. Average annual spending growth would be around 1.4% in real terms between 2016-17 and 2021–22.

However, the IFS researchers highlight that the average historic increase in UK health spending is 4%, meaning there is only a “modest” long-term difference between the plans once the growing and ageing population is taken into account.  

For example the population in England is expected to grow by 3.7% between 2016 and 2021, with the number of those aged 65 and over likely to increase by 9.2%, and the numbers aged 85-plus up 14.5%.

All of which have important implications for NHS spending, the IFS highlighted, and they called on the next government to “start focusing on finding and implementing a long-term solution to these funding pressures now”.

Finding the required increase in spending to deal with these demographic pressures would need either substantial tax increases or substantial cuts to other areas of public spending in future years, which governments may find difficult, the review noted.

“In the long run the NHS would be better served by a serious attempt to address these issues in a coherent and systematic fashion, than by the government just announcing further short term funding fixes," the analysis stated.

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Richard Johnstone is CSW's deputy editor and tweets as @RichRJohnstone

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