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Number crunching the Spending Review


04 Dec 2015

The NHS will suffer the “largest sustained fall in spending on healthcare” since its inception, the chief economist at The King’s Fund has stated.

Addressing The Spending Review: What does it mean for health and social care? event, Professor John Appleby said it was clear the government had not hit its macro targets on borrowing and national debt.

Borrowing is 3.9% of Gross Domestic Product (GDP), rather than the planned 1.1%, the structural deficit hands at 3.4% instead of the anticipated 0% and national debt is 83% of GDP as opposed to the expected 67%.

This, in turn, impacts on ‘protected’ areas of spending, including the NHS and social care.

“It’s going to be the largest sustained fall in spending on healthcare as a percentage of GDP that we have seen since the foundation of the NHS,” said Professor Appleby.

He reached the conclusion after analysing care as a percentage of national wealth, assuming Scotland, Wales and Northern Ireland receive similar packages.

While the government have pledged to give NHS England an extra £8.4bn in real terms by 2020/21, Professor Appleby points out NHS England does not account for all NHS spending.

“There’s about £15bn of other spending and that is not protected. What it looks like will happen is that there will be a loss of around £4.6bn over the five years from other parts of the NHS,” he said.

“The next five years is going to be pretty similar to the last five years, so it’s going to be a decade of pretty tough finances.”

However, the starting position is worse than in 2010, with 95% of all acute trusts and 75% of all organisations now in deficit.

Appleby commented: “We are starting from the position where there are no more biscuits at meetings, hospitals have switched to low energy light bulbs or whatever they are – these things can’t be done again.

“So we are in a completely different ballgame in terms of extracting more productivity gains.

“It’s a very different world we are in at the moment.”

Professor Chris Ham, chief executive of The King’s Fund, said: ‘From the Fund’s point of view there is some welcome news in the spending review, particularly around the frontloading of the NHS settlement, the opportunities for local government through the social care precept, the announcement on the Better Care Fund and having separate funding for that rather than taking it from the NHS ring-fence.

“But clearly there are big, big pressures too. What’s happening around public health budgets, the squeeze on the NHS in the middle of the parliament and towards the end and of course concerns about the pressures on social care.”

Professor Appleby said the challenge for Chancellor George Osborne will be squeezing around 16% more value out of every health care pound and 20% out of every social care pound by 2020.


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