The Health Foundation: What is the outlook for health funding? (24 January 2023)

Summary

In this analysis, the Health Foundation looks at the outlook for health funding following the 2022 Autumn Statement, draws out some implications for clearing the NHS estate maintenance backlog and looks at the potential impact of pay and other cost pressures on NHS spending power. 

Content

Key points

• The 2022 Autumn Statement saw the Chancellor promise an extra £3.3bn for the NHS and £1.4bn for capital investment in 2023/24 and 2024/25. In cash terms, spending in 2024/25 will be almost £14bn higher than in 2022/23.
• Much of this additional spending will be needed to meet inflation. After accounting for inflation, real-terms funding in 2024/25 will be £6bn higher than in 2022/23.
• This means that in real terms, core day-to-day spending on the NHS will rise by 2% a year by 2024/25, while capital spending will grow by just 0.2%.
• Overall, the Department of Health and Social Care’s funding settlement will increase by 1.2% a year in real terms over the next 2 years. This is higher than planned at the last Spending Review but far below the 3.6% long-term average growth rate.
• The NHS continues to face rising cost pressures that will erode the spending power of this settlement, with pay being the most significant. Health service inflationary pressures may be higher than the government estimates through the central GDP deflator forecast.
• The different methods used to estimate inflation for the whole economy show that the buying power of this settlement is uncertain. The unknown outcome of future pay negotiations and volatility in the cost of other key inputs add further uncertainty around the actual cost pressures the health care sector will face.