NHS Funding
Comment on the NHS 5-Year Forward View Funding
There is considerable confusion over the figures in the recently published NHS Forward Review. The funding scenarios in the Forward View are less than transparent in what they suggest. This is because the scenarios encompass a) funding requirements for infrastructure and operational investment, b) an attenuation of demand pressures, and, only partly explained, suggested efficiency savings.
As it is impossible to get behind the outline figures in the ‘plan’ it is only possible to provide a broad brush assessment. However, one can indicate what is being assumed, beyond what is stated in the concluding section on funding in the plan.
The two figures being discussed in the media and by politicians have been the overall £30 billion shortfall in funding by 2020, based on a flat real term funding over the period, and the £8 billion assumed gap to be filled by further funding. It is important to note that this £8 billion figure is nowhere stated in the plan.
In fact the £8 billions ‘shortfall’ figure is produced by assuming a 4% increase in NHS ‘productivity’ over the period coming from two sources. First, an increase in efficiency of 2-3% (stated in the plan) and an assumed 1-2% attenuation in demand (mostly happening in the second half of teh 5-year period). This combined 4% NHS ‘overall productivity’ will reduce the £30 billion overall shortfall by £22 billion, hence leaving the need for the £8 billion requirement.
The middle scenario is based on a1.5% p.a. efficiency saving (historically the efficiency saving has been half that figure at 0.8% p.a.). This would produce a realistic saving over the 5-year period of around £8 billion. The likely funding shortfall is thus £22 billion.
This figure would require an annual increase in NHS funding of 4% p.a. Such an increase is perfectly affordable assuming a national economic growth rate of 2.5%. In fact, the 4% figure is exactly the annual real growth rate over the history of the NHS!
These figures are, not surprisingly, the reverse of the implied scenario.
Michael Lloyd