Headlines: July 20th, 2009

Pledges by the two main political parties on National Health Service spending are likely to lead to cuts elsewhere or increases in tax according to detailed analysis published today by the King’s Fund and the Institute for Fiscal Studies. They say commitments made by Labour and the Conservative not to cut NHS spending in real terms from 2011 onwards would inevitably lead to hard decisions.

The analysis shows those decisions could mean cuts to other departments’ budgets or measures to raise tax income in the period up to 2017. Today’s study shows that over the review periods from 2011 to 2014 spending by all departments, including the health service, could reduce by an average of 2.3 per cent a year in real terms. If the NHS is protected other departments would face bigger cuts.

Researchers from the two organisations have looked at three plausible funding scenarios for health services in England and have measured the implications for other departments and for taxation. They say that even in the most optimistic scenario, the NHS will struggle to meet health care needs without significant increases in productivity.

If the NHS were to receive real increases averaging 2.5 per cent a year from 2011 to 2017 budgets for other departments could need to be cut by an average of around 2.8 per cent. That would represent a real reduction on 2010-11 budgets of 16 per cent over six years. Even with no real rise in NHS funding cuts elsewhere could be 8 per cent by 2016-17.

John Appleby, the Chief Economist at the King’s Fund and co-author of the report said: “Our analysis shows that the NHS is facing the most significant financial challenge in its history.”