The Treasury, the Budget and the NHS

Pills and money Image copyright Thinkstock/Woolzian

The big decisions on financing the NHS over the next few years are likely to come in the autumn with the departmental spending review.

Beyond a restatement of the commitment to an extra £8bn in 2020, the chancellor's Budget is likely to focus on welfare spending rather than the protected departments like health.

But, for what will be one of the most important domestic policy decisions made by this government, detailed analysis of the financial needs of the NHS in England is under way.

Department of Health and Treasury officials are poring over projections for health demand. They need to be sure that the £8bn identified by NHS chiefs is realistic. That figure was reached after assuming highly ambitious efficiency savings of £22bn by 2020. Ministers want to be assured that figure is achievable.

The last thing the Government wants is to announce a spending review with plans for the NHS over this parliament, only for the service to demand more investment as the election gets closer. The word from Whitehall, and indeed NHS England, is that the much-repeated £8bn and £22bn were broad, initial estimates. A fair amount of stress-testing and re-appraisal of the numbers is now taking place.

Number crunching

As work on the spending review progresses, covering the next few years, the debate on NHS finances this year is intensifying.

There is always scepticism in Whitehall when hospital trust leaders call for more cash. This early in the financial year, the chancellor is hardly likely to heed the siren voices warning of another looming deficit. But those voices are becoming louder.

Last week the Kings Fund think tank warned that financial problems were now "endemic" with even the best-run hospitals forecasting deficits this year. The fund has added its voice to those predicting that NHS providers could slip further into the red. This followed hard on the heels of the Healthcare Financial Management Association talking of a "bleak financial outlook" with nearly four-fifths of trust finance directors expecting to be in a worse position at the end of this year than last.

The government line is that hospitals and other health trusts should strive for the most efficient use of resources and that there is no scope for another injection of cash this year, especially when other departments are being squeezed so hard. But the response of NHS insiders is that long-term productivity improvements will take time and there is a serious danger that the allocated budget ceiling will be breached because of inexorably rising patient demand.

Mind the gap

It's a familiar argument - does the NHS need more money or should it become more efficient with its budget?

The latest figures from the OECD club of advanced economies provide new perspective in this debate. In 2013, the latest year for which comparable data is available, the UK's total health spending (public and private) as a proportion of national income of 8.5% was below the OECD average of 8.9%.

The OECD figures show the UK below Greece and Portugal for health spending on this basis, though the latter two spend more on private healthcare and rather less on public provision. The government-funded proportion of total healthcare in the UK is one of the highest in the OECD.

The data from the OECD provide ammunition to those who argue for higher public spending on health in the UK. But at a time of austerity in Whitehall, such a demand seems unlikely to gain much traction.

Getting the right balance between the requirements of the health service in the face of a rising population with more complex needs and the need to keep a tight rein on spending may cause a few sleepless nights for ministers between now and the autumn.

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