Wednesday, 5 August 2009

UK - Report Forecasts Future for NHS Funding

A report into the possible future of NHS funding was published in July 2009. The report, How cold will it be? Prospects for NHS Funding: 2011-17, by The King’s Fund and Institute for Fiscal Studies, analyses how much of an impact the economic recession could have on NHS funding. Public spending will be inevitably hit by the financial crisis, and the report analyses the different outcomes this could have on the NHS in England between 2011/12 to 2016/17.

There are three possible funding outcomes over the next two spending review periods:
  • ‘Tepid’ – annual real increases of 2% for the first three years, increasing to 3% for the final three years;
  • ‘Cold’ – zero real change; and
  • ‘Arctic’ – annual real reductions of 2% for the first three years, falling to 1% for the final three years.

The financial future of the NHS remains uncertain, and depends on the extent of tax increases and productivity levels. The report notes that over the next spending review period (2011/12-2013/14) the budget could reduce for all government areas, including the NHS, by an average of 2.3% per year. If the NHS were to be protected by a greater or lesser degree, this could result in greater cuts for other departments, although this could be lessened by an increase in taxes.

The changes to the budget could have implications on taxation. Even the ‘tepid’ scenario would require an increase in taxation (or reduction in spending on social security benefits and tax credits) of £6.9 billion, which would be equivalent to £220 extra per family, or raised through a 1.6% increase in the level of VAT.

The report notes that demographic pressures, including a rising and ageing population, are likely to cost the NHS around £1.0-1.4 billion extra each year at 2010/11 prices, and would require funding increases of around 1.1% to maintain quality. Only the ‘tepid’ scenario would provide enough money to cover this. These pressures are also adding to the demands placed on the healthcare system, and the report argues that productivity gains are essential, regardless of the future funding of the NHS.

The report notes that the NHS could fill this gap in funding with increased productivity levels. However, these would need to be significant if they were to make an impact. The report states that over the period between 2011 and 2017, the NHS would need to make gains of between £21.6 billion and £47.0 billion, equivalent to improvements of 3.4% to 7.4% per year, or £3.6 billion to £7.8 billion per year.

The report argues that the NHS in England is in some ways better prepared than ever to deal with the downturn. Current funding levels mean that it has employed more professionals, there have been huge improvements in the infrastructure and waiting times have been dramatically reduced.

Further reading - An in-depth analysis of the UK pharmaceutical market, including some background information on NHS funding, is available from Espicom: The Pharmaceutical Market: United Kingdom (published June 2009)

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