In a policy briefing, Gainsbury says progress towards the three ‘shifts' targeted in the 10-Year Health Plan will be curtailed unless the Government provides more upfront funding for the NHS, or intervenes to flatten growth in demand for health care.
Gainsbury says: ‘Spending pressures deriving from the cost of pay settlements, growing demand for healthcare, and targets to increase elective capacity have more than wiped out the £22.6bn "downpayment" that the chancellor announced for the NHS in October last year. And that's despite £6bn of recurrent efficiency savings expected this year and last.'
The analysis highlights Labour has budgeted for healthcare growth of 2.9% in 2024/25 and 2025/26 compared with 2.4% under the previous Governments between 2011/12 and 2023/24. However, this is still the below the historical long-term average of 3.7% between 1979/80 and 2019/20.
As a result, the DHSC budget is around £37bn (18%) lower than what it would have been had it grown in the long-term trend.
In the current year financial year, £1.5bn is allocated to cover NHS costs for rises in National Insurance meaning spending growth is set to be less than 2% in real terms, despite a cash injection of £22.6bn over the two years to 2025/26 at the autumn budget.
The think-tank says the extra ££22.6bn allocated to the DHSC by 2025/26 is more than absorbed by spending pressures during 2024/25 and 2025/26, such as inflation (including the cost of meeting NHS pay settlements following industrial action); population growth and ageing; rising public expectations of health care; and the cost of expanding elective care capacity to meet waiting times targets.
As a result, Gainsbury says the NHS facing substantial unfunded spending pressures by the end of the current financial year, although around £6bn of these would be recouped if NHS providers maintained their recent levels of annual cost efficiency savings over the same two years.
While the Government hopes savings from the dismantling of NHS England, cuts to integrated care boards and income from the immigration health surcharge will fill the remaining gap, Gainsbury says the DHSC faces a funding gap of £1.3bn by the end of this financial year as a best-case scenario.
Gainsbury concludes: ‘Sooner or later Government will find itself confronted with the unenviable choice of either having to provide more upfront funding for the NHS, or seeking to flatten growth in demand for health care through measures like setting the bar higher on the cost effectiveness of new treatments or significant investment in prevention.'
