The NHS budget and how it has changed

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Current funding

Funding for health services in England comes from the Department for Health and Social Care’s budget. Planned spending for the Department of Health and Social Care in England was £201.7 billion in 2020/21, up from £148.8 billion in 2019/20.

This includes more than £50 billion of extra funding for the Department of Health and Social Care 2020/21 response to the Covid-19 pandemic, which included procuring personal protective equipment for staff, developing the Test and Trace programme, extending use of the independent sector to undertake planned treatment, and improving the discharge process for hospital patients.

Most of the Department’s core budget (ie, excluding Covid-19 spending) is revenue funding for spending on day-to-day items such as staff salaries and medicines. The remainder is for capital spending on buildings and equipment. The majority of this budget is transferred to NHS England and NHS Improvement for spending on health services. The rest is allocated to other national bodies for spending on other health-related functions such as public health, training and development of NHS staff, and regulating the quality of care.

Recent changes to funding

Austerity

During the period of austerity that followed the 2008 economic crash, the Department of Health and Social Care budget continued to grow but at a slower pace than in previous years. Budgets rose by 1.4 per cent each year on average (adjusting for inflation) in the 10 years between 2009/10 to 2018/19, compared to the 3.7 per cent average rises since the NHS was established.

NHS five-year funding deal

In July 2018, the Prime Minister announced a new five-year funding deal that would see NHS funding rise by £33.9 billion in cash terms (ie, not adjusted for inflation) by 2023/24 compared to 2018/19, a rate of increase that is closer to, but still lower than, the long-term average.

This long-term funding deal only applies to services within the scope of NHS England’s mandate, and excludes important areas of the Department of Health and Social Care budget such as capital investment, public health and the education and training of NHS staff.

Manifesto commitments and Covid-19

There have been several increases to health spending since the five-year NHS funding deal was announced.

In the September 2019 Spending Round, the government announced increases to budgets for capital investment, the public health grant and the education and training budgets for the NHS workforce.

In the March 2020 spring Budget, the government provided further boosts to capital spending and £5.4 billion of revenue funding until the end of this parliament to support its manifesto commitments on more clinical staff, more GP surgery appointments, greater community-based care for people with learning disabilities or autism, and free hospital car parking for some groups.

Because of these changes, the Department of Health and Social Care budget between 2020/21 and 2021/22 will be much larger than originally planned. £20.9 billion of extra Covid-19-related funding has already been allocated to the Department for 2021/22, and more funding is likely to be allocated as the costs of responding to the pandemic – including the procurement and distribution of vaccines – becomes clearer. A substantial share of this extra Covid-19 funding is non-recurrent and will not be maintained in the budgets allocated to the Department after the pandemic ends.

 

Source: The King’s Fund

Date: Friday 11 December 2020