Inflation has eroded NHS England budget by £3.5bn, think-tank finds

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The budget of the NHS in England is worth £3.5bn less this financial year than last as a result of inflation, according to research that comes as the health service steels itself for one of the toughest winters on record.

Analysis by the Health Foundation, which was shared with the Financial Times, found that higher than expected price growth meant there had been a big real-terms reduction in funding this year, with another cut expected next year.

Under current plans, the think-tank said NHS England departmental resource spending is £161bn in 2023-24, £3.5bn less than 2022-23 in real terms, which amounts to a decrease of 2.1 per cent.

Planned funding would see this figure fall by a further £1bn in real terms in 2024-25 compared with 2023-24, it said.

The analysis comes after the UK government decided not to allocate extra funding for NHS England in last month’s Autumn Statement.

Prime Minister Rishi Sunak has said one of his five “people’s priorities” is for waiting lists for non-urgent care to be falling by the election expected next year. But the backlog has risen in recent months, with official figures showing a record 7.75mn patients queueing for treatment.

Health leaders have warned of a crisis in the service and called for an urgent cash injection to help reduce waiting lists after a wave of industrial action by health workers since December 2022 compounded funding pressures.

Strikes by doctors, nurses and other staff have so far led to the cancellation of about 1.2mn operations and appointments.

Last week, junior doctors in England announced they would walk out for nine more days in December and January after failing to reach a deal with ministers over a better pay offer.

However, even before the strikes started in 2022, the NHS was struggling to mitigate the effect of high inflation on its budget.

Total health spending in England in 2022-23 was £182bn. This figure is set to increase to £190bn in 2024-25, according to the Health Foundation, “but higher than expected inflation means that, on current plans, this would be a real-terms reduction in funding”.

While total health spending has increased in the current parliament as a result of the Covid-19 pandemic, present plans for the future are “far less generous”, the think-tank said.

As a result, average funding growth for this parliament as a whole could “fall significantly below the long-term average”, it added.

Anita Charlesworth, director of research and the REAL centre at the Health Foundation, said keeping spending plans as designed for this and next year “would be challenging in the best of times but with post-Covid backlogs, ongoing industrial action and productivity struggling to recover after the pandemic, it’s hard to see how this can be sustained”.

“Whichever the next government is will have incredibly tough decisions to make — to either limit what the NHS can do or increase funding over the long term against a backdrop of fiscal pressure,” she added.

The Department of Health and Social Care said: “NHS funding — including depreciation — is still increasing to a record level and the Autumn Statement increased the NHS budget for 23-24 by over £1 billion. We are investing a record £165.9 billion in 2024/25, which includes £3.3 billion to improve urgent and emergency, elective, and primary care performance to pre-pandemic levels.”