In this slideshow, Rowena Crawford, Senior Research Economist at the Institute for Fiscal Studies, provides the outlook for NHS and social care funding over the next decade and examines the trade-off between English NHS spending and other public service spending during this period.
The slideshow is related to: NHS and social care funding: the outlook to 2021/22 (July 2012 ), an Institute for Fiscal Studies (IFS) report by Rowena Crawford and Carl Emmerson, funded by the Nuffield Trust. More information can be found on our website: www.nuffieldtrust.org.uk.
Rowena presented at the Nuffield Trust and Institute for Fiscal Studies event: NHS and social care funding: the outlook for the next decade.
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Rowena Crawford: NHS and social care funding: the outlook to 2021-22
1. 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?
2. Historical UK NHS spending
Tightest 4-year period (last 50 years): 1975-76 to 1979-80 (AARG 1.3%)
Tightest 4-year period: 1950-51 to 1954-55 (AARG -2.4%)
Average Annual Real Growth: 4.0%
140 14
Percentage of national income
real terms AARG: AARG:
£ billion, 2012–13 prices
120 3.3% 6.4% 12
% national income
100 10
80 8
60 6
40 4
20 2
0 0
1949−50
1953−54
1957−58
1961−62
1965−66
1969−70
1973−74
1977−78
1981−82
1985−86
1989−90
1993−94
1997−98
2001−02
2005−06
2009−10
Source: Figure 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)
4. Scenarios for English NHS spending to 2021-22
145
Outturn
(£ billion, 2012–13 prices)
SR2010 Plans £10 bn
English NHS spending
135 OBR A
NHS: Real freeze £4 bn
125 NHS: constant % national income
NHS: LR Average £24 bn
115
105
95
85
2006–07
2007–08
2008–09
2009–10
2012–13
2013–14
2014–15
2015–16
2016–17
2017–18
2018–19
2019–20
2020–21
2021–22
2010–11
2011–12
Source: Figure 2a
5. Scenarios for English NHS spending to 2021-22
8.0% Outturn SR2010 Plans
(percentage of national income)
NHS: Real freeze NHS: constant % national income
7.5%
English NHS spending
NHS: LR Average
7.0%
6.5%
6.0%
5.5%
5.0%
2006–07
2007–08
2008–09
2009–10
2012–13
2013–14
2014–15
2015–16
2016–17
2017–18
2018–19
2019–20
2020–21
2021–22
2010–11
2011–12
Source: Figure 2b
6. What is likely to be available for public services?
Average annual real change (%)
2010−11 to 2014−15 to 2016−17 to 2014−15 to
2014−15 2016−17 2021−22 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
7. What is likely to be available for public services?
Average annual real change (%)
2010−11 to 2014−15 to 2016−17 to 2014−15 to
2014−15 2016−17 2021−22 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
8. What is likely to be available for public services?
Average annual real change (%)
2010−11 to 2014−15 to 2016−17 to 2014−15 to
2014−15 2016−17 2021−22 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
9. What is likely to be available for public services?
Average annual real change (%)
2010−11 to 2014−15 to 2016−17 to 2014−15 to
2014−15 2016−17 2021−22 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
10. Trade-off between English NHS spending and
other public services (2015-16 to 2021-22)
3.0
Average annual real growth in
other public service spending
2.5
2.0
NHS: real freeze
1.5
‘Equal pain’
1.0 1.4%
1.1% NHS: constant % national income
0.5
0.6% NHS: LR average
0.0
0.0%
-0.5
-1.0
0.0% 1.1% 2.4% 4.0%
-1.5
-1 0 1 2 3 4 5 6
Average annual real growth in English NHS spending
Source: Figure 3
11. Trade-off between English NHS spending and
other public services (2015-16 to 2021-22)
3.0
Average annual real growth in
other public service spending
2.5
2.0
NHS: real freeze
1.5
‘Equal pain’
1.0
NHS: constant % national income
0.5
NHS: LR average
0.0
-0.5
-1.0
-1.5
-1 0 1 2 3 4 5 6
Average annual real growth in English NHS spending
Source: Figure 3
12. Trade-off between English NHS spending and
other public services (2015-16 to 2021-22)
3.0
Average annual real growth in
other public service spending
2.5
2.0
NHS: real freeze
1.5
‘Equal pain’
1.0
NHS: constant % national income
0.5
NHS: LR average
0.0
-0.5
-1.0
-1.5
-1 0 1 2 3 4 5 6
Average annual real growth in English NHS spending
Source: Figure 3
13. Trade-off between English NHS spending and
other public services (2015-16 to 2021-22)
3.0
Average annual real growth in
other public service spending
2.5
2.0
1.5
‘Equal pain’
1.0
NHS: constant % national income
0.5
NHS: LR average
0.0
-0.5
-1.0
-1.5
-1 0 1 2 3 4 5 6
Average annual real growth in English NHS spending
Source: Figure 3
14. Trade-off between public service spending and
tax increases/further welfare cuts
90
NHS: constant % national income…
Required tax increases or further
75
welfare spending cuts (£ billion,
60
£44bn
2012−13 terms)
45
30
15 £9bn
0
1.0% 2.4%
-15
-30
-45
-1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0
Average annual real growth in public service spending
(excluding English NHS)
Source: Figure 4
15. 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)
16. 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.
17. 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
18. 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?