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:
Β£ billion, 2012β13 prices
120 3.3% 6.4% 12
% national income
100 10
80 8
60 6
40 4
20 2
0 0
1949β50
1953β54
1957β58
1961β62
1965β66
1969β70
1973β74
1977β78
1981β82
1985β86
1989β90
1993β94
1997β98
2001β02
2005β06
2009β10
Source: Figure 1
3. Scenarios for English NHS spending to 2021-22
2010-11 to 2014-15
β’ Assume cash spending plans for English NHS spending turn out
as Budget 2012 forecast
β Essentially a 4-year real freeze in spending
β Would be likely to be the tightest 4-year period in the last 50 years
2015-16 to 2021-22:
β’ Consider 3 scenarios for English NHS spending:
β Real freeze (average 0.0% per year real growth)
β Constant as % national income (average 2.4% per year real growth)
β Long run average growth (average 4.0% per year real growth)
4. Scenarios for English NHS spending to 2021-22
145
Outturn
(Β£ billion, 2012β13 prices)
SR2010 Plans Β£10 bn
English NHS spending
135 OBR A
NHS: Real freeze Β£4 bn
125 NHS: constant % national income
NHS: LR Average Β£24 bn
115
105
95
85
2006β07
2007β08
2008β09
2009β10
2012β13
2013β14
2014β15
2015β16
2016β17
2017β18
2018β19
2019β20
2020β21
2021β22
2010β11
2011β12
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%
2006β07
2007β08
2008β09
2009β10
2012β13
2013β14
2014β15
2015β16
2016β17
2017β18
2018β19
2019β20
2020β21
2021β22
2010β11
2011β12
Source: Figure 2b
6. What is likely to be available for public services?
Average annual real change (%)
2010β11 to 2014β15 to 2016β17 to 2014β15 to
2014β15 2016β17 2021β22 2021β22
Total public spending β0.8 β0.9 +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 β2.1 β2.9 +2.2 +0.8
With Β£8.5bn welfare cut by 2016β17:
Welfare spending +1.0 β2.6 +2.1 +1.1
Public service spending β2.1 β1.7 +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 (%)
2010β11 to 2014β15 to 2016β17 to 2014β15 to
2014β15 2016β17 2021β22 2021β22
Total public spending β0.8 β0.9 +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 β2.1 β2.9 +2.2 +0.8
With Β£8.5bn welfare cut by 2016β17:
Welfare spending +1.0 β2.6 +2.1 +1.1
Public service spending β2.1 β1.7 +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 (%)
2010β11 to 2014β15 to 2016β17 to 2014β15 to
2014β15 2016β17 2021β22 2021β22
Total public spending β0.8 β0.9 +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 β2.1 β2.9 +2.2 +0.8
With Β£8.5bn welfare cut by 2016β17:
Welfare spending +1.0 β2.6 +2.1 +1.1
Public service spending β2.1 β1.7 +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 (%)
2010β11 to 2014β15 to 2016β17 to 2014β15 to
2014β15 2016β17 2021β22 2021β22
Total public spending β0.8 β0.9 +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 β2.1 β2.9 +2.2 +0.8
With Β£8.5bn welfare cut by 2016β17:
Welfare spending +1.0 β2.6 +2.1 +1.1
Public service spending β2.1 β1.7 +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
βEqual painβ
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
βEqual painβ
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
βEqual painβ
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
βEqual painβ
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 incomeβ¦
Required tax increases or further
75
welfare spending cuts (Β£ billion,
60
Β£44bn
2012β13 terms)
45
30
15 Β£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
β’ Increasing pressures on public social care funding
β Demographic changes
β Dilnot Commission proposed reforms to funding framework
β’ Projections in the Commission final report for funding 2014-15 to
2021-22:
β Current system: 3.3% a year real increase
β Proposed system: 5.4% a year real increase
β’ Implementing the proposed system while keeping English NHS
spending constant as a share of national income...
β Other public services would grow by 0.3% per year
β (Compared to 0.5% per year if current social care funding system
maintained)
16. Conclusions
β’ 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
β’ The outlook for public service spending over the next decade
continues to look tight
β Cuts of 1.7% a year in 2015-16 and 2016-17, even with hinted at
Β£8.5 billion welfare cuts
β Growth of 2.2% a year in 2017-18 to 2021-22
β Growth of 1.1% a year over whole period 2015-16 to 2021-22
β’ Implications of English NHS spending over 7 years from April
2015:
β Real freeze: other public service spending grows by 1.4% pa.
β Constant % national income: other public service spending grows
0.6% pa.
17. Conclusions
β’ Also pressure on public funding of social care
β Would further reduce the available funds for other public services
β’ Squeeze on other public services could be ameliorated by tax
increases or further welfare cuts
β’ OBR estimates suggest increase in NHS spending in line with
national income would not be sufficient to keep pace with costs
of ageing population
β’ 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?