Executive Summary

Health spending, and the performance of the NHS, will feature prominently in the upcoming general election campaign. Many different factors matter for NHS performance and for the wider health of the population, but one important factor is the level of spending on health services. In this IFS pre-election briefing, we examine UK government health spending over the past seven decades. We then discuss the outlook for health spending over the years to come.

Over this parliament, real-terms UK health spending (i.e. spending adjusted for economy-wide inflation) has grown below the long-term average rate (2.4% per year over this parliament, versus an average of 3.6% over the longer term). But the UK’s poor economic performance means that health spending as a share of national income has increased by more than the long-term average (by an average of 0.13 percentage points per year compared with an average of 0.06).

Over the past four decades, health spending has shown a clear tendency to rise faster than planned. But in recent years higher than expected inflation has reversed this trend. The Department of Health and Social Care (DHSC) budget has grown by less than planned over this parliament, with cash top-ups insufficient to offset the effects of higher inflation. Conservative party plans at the 2019 general election implied that the day-to-day DHSC budget (for England) would rise by 3.3% per year in real terms; latest plans imply average growth of 2.7% per year between 2019–20 and 2024–25. This is a marked departure from the experience of recent decades.

As well as growing in real terms and relative to the size of the economy, health spending has risen as a share of government spending over time. The DHSC’s day-to-day budget has risen dramatically from a 26% share of the all-departmental total in 1998–99 to 43% in 2022–23. Delivering health services has become a larger and larger part of what the government does.

Capital spending has long been much more volatile than day-to-day health spending. After being cut back sharply in the 2010s, capital spending has increased in recent years – though in 2023–24, the capital budget in England was raided to fund day-to-day pressures, returning to the bad practice of the late 2010s. One consequence of low capital spending is the deterioration of the NHS estate in England, where the maintenance backlog has more than doubled over the past decade. Within that, the ‘high-risk’ backlog has quintupled.

Health spending per person has been consistently higher in Scotland, Wales and Northern Ireland than in England since the start of devolution, though the gap in spending has narrowed over time. In 1999–2000, Scotland spent 22% more per person than England, Wales spent 12% more and Northern Ireland spent 15% more. But in 2019–20, on the eve of the pandemic, Scotland spent just 3% more, while Wales and Northern Ireland each spent 7% more.Within England, NHS spending this year is planned to be 32% higher per person in the area with highest funding (Cheshire and Merseyside) than in the area with lowest funding (Buckinghamshire, Oxfordshire and Berkshire West).

Making international comparisons of government health spending is challenging, but the available data suggest that the UK has moved up the ranks of health spending among comparable countries over the last three decades, going from comfortably below the European average in the early 1990s, to around the average in the mid-2000s, and slightly above average from the late 2000s onwards. Since the start of the pandemic, UK health spending has surged further up the (European) ranks, standing behind only France and Germany in 2022. It remains to be seen whether this will persist into future years.

There are no published plans for health spending in England beyond this year (2024–25) when the current Spending Review period ends. Although the Chancellor announced additional funding for new technology in future years in the Spring Budget – a sensible area to focus attention – there were no pre-existing budgets to serve as a meaningful counterfactual, which makes it difficult to assess whether this funding is genuinely ‘additional’.

Further increases in health spending are almost certain. The NHS workforce plan for England, which both main UK parties have endorsed, implies real-terms funding increases of around 3.6% per year if it is to be achieved. This is equal to the long-run average increase in health spending, but much larger than the increases provided since 2010, and would need to be delivered amidst weaker economic growth than we enjoyed in the past. Over the longer term, the Office for Budget Responsibility (OBR) estimate that health spending will have to rise further to meet demographic and cost pressures. Although neither major political party has provided any detail on their plans for NHS funding, whoever is in office following the general election will have to confront this in the Spending Review due by the end of the calendar year.

The size of the NHS means that any increases in health spending will force difficult fiscal trade-offs elsewhere. Under the government’s current plans for public service spending from next year onwards, delivering the NHS workforce plan in England implies flat real-terms budgets for all other government departments. Taking into account other spending commitments on childcare, defence and elsewhere implies large real-terms cuts to remaining departments. To avoid these cuts to other departments would require a higher overall spending envelope, which in the absence of a marked improvement in economic growth would need to be funded by some combination of increased borrowing or higher taxes.