What happened to the extra NHS billions?: Three years ago the coalition government’s first Spending Review promised to ‘ring fence’ the budget for the English NHS and to increase spending in real terms each year to 2014/15. So what has actually happened to NHS spending?
Figure 1 compares English NHS spending as announced in the 2010 Spending Review (at 2010/11 prices) with actual and planned NHS spending. The comparison is not straightforward for a number of reasons.
First, from 2011/12, around £2 billion a year was taken out of the NHS budget and transferred to local authorities and the Department for Communities and Local Government. This was in part to support people with learning disabilities and in part to promote joint working between councils and the NHS. Figure 1 adds these transfers back in to make the figures comparable.
NB: Cash figures deflated using 13 March 2013 Treasury GDP deflator figures
In 2010/11 (before the current Spending Review period), spending was £2.2 billion lower than planned by the previous government, in large part due to the Department surrendering a £1.9 billion underspend to the Treasury. Since then, while planned spending was in line with the 2010 Spending Review forecasts, figures for 2011/12 show an underspend of £1.7 billion; most of this – around £1.4 billion – was returned to the Treasury and the remainder rolled forward into the next year’s NHS budget.
Looking just at the remaining spending for the NHS (that is, minus transfers to local authorities) shown by the blue bars, spending will increase by around 3.6 per cent over the four years to 2014/15 (more generous than planned due to the smaller-than-forecast levels of inflation). However, in 2011/12 real spending reduced by 0.2 per cent and, in line with current plans and measures of inflation, will fall by 0.1 per cent in 2013/14.
Adding the transfers back in to make the figures directly comparable with the 2010 Spending Review plans, we can see (in Figure 2) that spending between 2010/11 and 2014/15 could increase by more in real terms (+4.4 per cent) than planned in the 2010 Spending Review (+2.2 per cent), due in part to the lower levels of inflation than forecast at the time.
NB: Cash figures deflated using 13 March 2013 Treasury GDP deflator figures
In December last year, the Chair of the UK Statistics Authority, Andrew Dilnot, chastised Jeremy Hunt for claiming that NHS spending had increased in real terms. So, does the latest data suggest the government is on course to meet its pledge for real increases in the English NHS budget every year to 2014/15? Well, on the face of it, yes – thanks perhaps to smaller increases in inflation than forecast. But government, not NHS, decisions to transfer budgets to local authorities, as well as to give ad hoc monies to support councils’ budgets in general – plus clawbacks by the Treasury – leave the NHS in England with a couple of years of small real reductions in spending. As ever, smoke and mirrors – in reality, as Dilnot pointed out, expenditure in real terms will change little over the Spending Review period.
These calculations will be even more complex following the announcement of the NHS allocations for 2015/16 in the latest Spending Review. As expected, the government’s pledge to protect the NHS budget is maintained – just; spending is planned to increase by 0.1 per cent in real terms (an amount easily within the margin for error of the inflation measure used to calculate the increase). Importantly, the amount transferred from the NHS to local authorities to provide a new ‘pooled budget’ for integrated care will increase significantly to around £3 billion.
For the managers, nurses and doctors on the front line, the nuances of fluctuations in the GDP deflator and which government department is in charge of which budget are less relevant. The fact is that there isn’t a lot of money around (for now), and the NHS in England (and in Scotland, Wales and Northern Ireland) faces a continuing battle to extract greater value from every health pound as demands and expectations grow.
Figure 1 compares English NHS spending as announced in the 2010 Spending Review (at 2010/11 prices) with actual and planned NHS spending. The comparison is not straightforward for a number of reasons.
First, from 2011/12, around £2 billion a year was taken out of the NHS budget and transferred to local authorities and the Department for Communities and Local Government. This was in part to support people with learning disabilities and in part to promote joint working between councils and the NHS. Figure 1 adds these transfers back in to make the figures comparable.
Figure 1: Spending Review 2010 plans and outturns for the English NHS (2010/11 prices)
NB: Cash figures deflated using 13 March 2013 Treasury GDP deflator figures
In 2010/11 (before the current Spending Review period), spending was £2.2 billion lower than planned by the previous government, in large part due to the Department surrendering a £1.9 billion underspend to the Treasury. Since then, while planned spending was in line with the 2010 Spending Review forecasts, figures for 2011/12 show an underspend of £1.7 billion; most of this – around £1.4 billion – was returned to the Treasury and the remainder rolled forward into the next year’s NHS budget.
Looking just at the remaining spending for the NHS (that is, minus transfers to local authorities) shown by the blue bars, spending will increase by around 3.6 per cent over the four years to 2014/15 (more generous than planned due to the smaller-than-forecast levels of inflation). However, in 2011/12 real spending reduced by 0.2 per cent and, in line with current plans and measures of inflation, will fall by 0.1 per cent in 2013/14.
Adding the transfers back in to make the figures directly comparable with the 2010 Spending Review plans, we can see (in Figure 2) that spending between 2010/11 and 2014/15 could increase by more in real terms (+4.4 per cent) than planned in the 2010 Spending Review (+2.2 per cent), due in part to the lower levels of inflation than forecast at the time.
Figure 2: Real changes in Spending Review 2010 plans and outturn/planned spending
NB: Cash figures deflated using 13 March 2013 Treasury GDP deflator figures
In December last year, the Chair of the UK Statistics Authority, Andrew Dilnot, chastised Jeremy Hunt for claiming that NHS spending had increased in real terms. So, does the latest data suggest the government is on course to meet its pledge for real increases in the English NHS budget every year to 2014/15? Well, on the face of it, yes – thanks perhaps to smaller increases in inflation than forecast. But government, not NHS, decisions to transfer budgets to local authorities, as well as to give ad hoc monies to support councils’ budgets in general – plus clawbacks by the Treasury – leave the NHS in England with a couple of years of small real reductions in spending. As ever, smoke and mirrors – in reality, as Dilnot pointed out, expenditure in real terms will change little over the Spending Review period.
These calculations will be even more complex following the announcement of the NHS allocations for 2015/16 in the latest Spending Review. As expected, the government’s pledge to protect the NHS budget is maintained – just; spending is planned to increase by 0.1 per cent in real terms (an amount easily within the margin for error of the inflation measure used to calculate the increase). Importantly, the amount transferred from the NHS to local authorities to provide a new ‘pooled budget’ for integrated care will increase significantly to around £3 billion.
For the managers, nurses and doctors on the front line, the nuances of fluctuations in the GDP deflator and which government department is in charge of which budget are less relevant. The fact is that there isn’t a lot of money around (for now), and the NHS in England (and in Scotland, Wales and Northern Ireland) faces a continuing battle to extract greater value from every health pound as demands and expectations grow.
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