NHS and social care funding: the outlook to 2021-22 Rowena Crawford and Carl Emmerson Funded by the Nuffield Trust as part of the project Buying Time: What is the scale of the financial challenge facing the NHS and how can it rise to the challenge?

Historical UK NHS spending

0

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140 19

49−5

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0 Per

cent

age

of n

atio

nal i

ncom

e

£ bi

llion,

201

2–13

pric

es real terms

% national income AARG: 6.4%

AARG: 3.3%

Average Annual Real Growth: 4.0%

Source: Figure 1

Tightest 4-year period: 1950-51 to 1954-55 (AARG -2.4%) Tightest 4-year period (last 50 years): 1975-76 to 1979-80 (AARG 1.3%)

Scenarios for English NHS spending to 2021-22

2010-11 to 2014-15 • Assume cash spending plans for English NHS spending turn out

as Budget 2012 forecast – Essentially a 4-year real freeze in spending – Would be likely to be the tightest 4-year period in the last 50 years

2015-16 to 2021-22: • Consider 3 scenarios for English NHS spending:

– Real freeze (average 0.0% per year real growth) – Constant as % national income (average 2.4% per year real growth) – Long run average growth (average 4.0% per year real growth)

Scenarios for English NHS spending to 2021-22

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95

105

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135

145 20

06–0

7

2007

–08

2008

–09

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–10

2010

–11

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–22

Eng

lish

NH

S s

pend

ing

(£

billi

on, 2

012–

13 p

rices

) Outturn SR2010 Plans NHS: Real freeze NHS: constant % national income NHS: LR Average

OBR A

Source: Figure 2a

£4 bn

£24 bn

£10 bn

Scenarios for English NHS spending to 2021-22

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0% 20

06–0

7

2007

–08

2008

–09

2009

–10

2010

–11

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–12

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–22

Eng

lish

NH

S s

pend

ing

(p

erce

ntag

e of

nat

iona

l inc

ome)

Outturn SR2010 Plans NHS: Real freeze NHS: constant % national income NHS: LR Average

Source: Figure 2b

What is likely to be available for public services?

Average annual real change (%) 2010−11 to

2014−15 2014−15 to

2016−17 2016−17 to

2021−22 2014−15 to

2021−22 Total public spending –0.8 –0.9 +2.1 +1.3 Debt interest spending +3.4 +7.0 +1.4 +2.9 Welfare spending +1.0 +0.9 +2.1 +1.8 Public service spending –2.1 –2.9 +2.2 +0.8

With £8.5bn welfare cut by 2016−17: Welfare spending +1.0 –2.6 +2.1 +1.1 Public service spending –2.1 –1.7 +2.2 +1.1

Memo: forecast real growth in national income 3.0 2.1 2.4

Source: Table 2

What is likely to be available for public services?

Average annual real change (%) 2010−11 to

2014−15 2014−15 to

2016−17 2016−17 to

2021−22 2014−15 to

2021−22 Total public spending –0.8 –0.9 +2.1 +1.3 Debt interest spending +3.4 +7.0 +1.4 +2.9 Welfare spending +1.0 +0.9 +2.1 +1.8 Public service spending –2.1 –2.9 +2.2 +0.8

With £8.5bn welfare cut by 2016−17: Welfare spending +1.0 –2.6 +2.1 +1.1 Public service spending –2.1 –1.7 +2.2 +1.1

Memo: forecast real growth in national income 1.7 3.0 2.1 2.4

Source: Table 2

What is likely to be available for public services?

Average annual real change (%) 2010−11 to

2014−15 2014−15 to

2016−17 2016−17 to

2021−22 2014−15 to

2021−22 Total public spending –0.8 –0.9 +2.1 +1.3 Debt interest spending +3.4 +7.0 +1.4 +2.9 Welfare spending +1.0 +0.9 +2.1 +1.8 Public service spending –2.1 –2.9 +2.2 +0.8

With £8.5bn welfare cut by 2016−17: Welfare spending +1.0 –2.6 +2.1 +1.1 Public service spending –2.1 –1.7 +2.2 +1.1

Memo: forecast real growth in national income 1.7 3.0 2.1 2.4

Source: Table 2

What is likely to be available for public services?

Average annual real change (%) 2010−11 to

2014−15 2014−15 to

2016−17 2016−17 to

2021−22 2014−15 to

2021−22 Total public spending –0.8 –0.9 +2.1 +1.3 Debt interest spending +3.4 +7.0 +1.4 +2.9 Welfare spending +1.0 +0.9 +2.1 +1.8 Public service spending –2.1 –2.9 +2.2 +0.8

With £8.5bn welfare cut by 2016−17: Welfare spending +1.0 –2.6 +2.1 +1.1 Public service spending –2.1 –1.7 +2.2 +1.1

Memo: forecast real growth in national income 1.7 3.0 2.1 2.4

Source: Table 2

Trade-off between English NHS spending and other public services (2015-16 to 2021-22)

-1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0

-1 0 1 2 3 4 5 6

Aver

age

annu

al re

al g

row

th in

ot

her p

ublic

ser

vice

spe

ndin

g

Average annual real growth in English NHS spending

0.0%

0.6%

1.4%

4.0%

NHS: LR average

2.4%

NHS: constant % national income

0.0%

NHS: real freeze

Source: Figure 3

‘Equal pain’

1.1%

1.1%

Trade-off between English NHS spending and other public services (2015-16 to 2021-22)

-1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0

-1 0 1 2 3 4 5 6

Aver

age

annu

al re

al g

row

th in

ot

her p

ublic

ser

vice

spe

ndin

g

Average annual real growth in English NHS spending

NHS: LR average

NHS: constant % national income

NHS: real freeze

Source: Figure 3

‘Equal pain’

Trade-off between English NHS spending and other public services (2015-16 to 2021-22)

-1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0

-1 0 1 2 3 4 5 6

Aver

age

annu

al re

al g

row

th in

ot

her p

ublic

ser

vice

spe

ndin

g

Average annual real growth in English NHS spending

NHS: LR average

NHS: constant % national income

NHS: real freeze

Source: Figure 3

‘Equal pain’

Trade-off between English NHS spending and other public services (2015-16 to 2021-22)

-1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0

-1 0 1 2 3 4 5 6

Aver

age

annu

al re

al g

row

th in

ot

her p

ublic

ser

vice

spe

ndin

g

Average annual real growth in English NHS spending

NHS: LR average

NHS: constant % national income

Source: Figure 3

‘Equal pain’

Trade-off between public service spending and tax increases/further welfare cuts

-45 -30 -15

0 15 30 45 60 75 90

-1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0

Req

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d ta

x in

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or fu

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elfa

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pend

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(£ b

illio

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2012

−13

term

s)

Average annual real growth in public service spending (excluding English NHS)

NHS: constant % national income …

1.0%

£9bn

2.4%

£44bn

Source: Figure 4

Social care funding

• Increasing pressures on public social care funding – Demographic changes – Dilnot Commission proposed reforms to funding framework

• Projections in the Commission final report for funding 2014-15 to 2021-22: – Current system: 3.3% a year real increase – Proposed system: 5.4% a year real increase

• Implementing the proposed system while keeping English NHS spending constant as a share of national income... – Other public services would grow by 0.3% per year – (Compared to 0.5% per year if current social care funding system

maintained)

Conclusions

• Planned real freeze for 2010-11 to 2014-15 will, if delivered, be the tightest period of funding in the last 50 years of the NHS

• The outlook for public service spending over the next decade continues to look tight – Cuts of 1.7% a year in 2015-16 and 2016-17, even with hinted at

£8.5 billion welfare cuts – Growth of 2.2% a year in 2017-18 to 2021-22 – Growth of 1.1% a year over whole period 2015-16 to 2021-22

• Implications of English NHS spending over 7 years from April 2015: – Real freeze: other public service spending grows by 1.4% pa. – Constant % national income: other public service spending grows

0.6% pa.

Conclusions

• Also pressure on public funding of social care – Would further reduce the available funds for other public services

• Squeeze on other public services could be ameliorated by tax increases or further welfare cuts

• OBR estimates suggest increase in NHS spending in line with national income would not be sufficient to keep pace with costs of ageing population

• NHS productivity would need to increase to fill the gap between funding and demand pressures

NHS and social care funding: the outlook to 2021-22 Rowena Crawford and Carl Emmerson Funded by the Nuffield Trust as part of the project Buying Time: What is the scale of the financial challenge facing the NHS and how can it rise to the challenge?