The Spending Review: what does it mean for health and social care?

This briefing produced by The King’s Fund, the Nuffield Trust and The Health Foundation, provides an independent assessment of where the Spending Review leaves the NHS and social care.

Now that the dust has settled on the Chancellor’s announcements, our three organisations have come together to help ensure the debate is informed by a clear and objective analysis of the funding position and its implications for health and social care services.
Key points:

  • Total health spending in England will rise by £4.5 billion in real terms between 2015/16 and 2020/21.Looked at over the whole of this parliament, this will result in an increase of 0.9 percent a year, almost identical to the rate of increase over the last parliament. This is much less than expected following the announcement of the NHS settlement.
  • This is because the Spending Review defined ‘NHS’ spending as NHS England’s budget, not the whole of the Department of Health’s budget – the definition used by previous governments.
  • While NHS England’s budget will rise by £7.6 billion in real terms over the period, other health spending will fall by more than £3 billion, a 20 per cent cut.
  • The additional investment will be front-loaded with a significant increase in 2016/17 which is very welcome. However, much of this money will be absorbed by dealing with deficits among NHS providers and by additional pension costs.
  • With much smaller increases in later years, the NHS will struggle to maintain services, let alone invest in new models of care and implement seven-day services. This places even more emphasis on the huge challenge of finding £22 billion in productivity improvements by the end of the parliament.
  • Public health spending will fall by at least £600 million in real terms by 2020/21, on top of £200 million already cut from this year’s budget. This will affect a wide range of services including health visiting, sexual health and vaccinations.
  • Overall, the NHS is halfway through the most austere decade in its history. Public spending on health in the United Kingdom as a proportion of GDP is projected to fall to 6.7 per cent by 2020/21, leaving us behind many other advanced nations on this measure of spending.
  • A number of uncertainties make the settlement for social care difficult to gauge but spending is likely to be broadly flat in real terms over the parliament.
  • New powers to raise Council Tax by up to 2 per cent to spend on social care will provide flexibility for local authorities but are unlikely to raise as much as the government suggests and could disadvantage deprived areas with low tax bases.
  • Additional money for social care provided through the Better Care Fund from 2017/18 is welcome but risks arriving too late with the sector already on the brink of a crisis and a further significant cut in funding to follow next year.
  • The additional funding will not be enough to close the social care funding gap which we estimate will be somewhere between £2 billion and £2.7 billion in 2019/20, depending on how much is raised through the Council Tax precept.
  • Social care also faces additional cost pressures from implementing the National Living Wage which will add another £800 million to these estimates, leaving an estimated total funding gap of between £2.8 billion and £3.5 billion by the end of the parliament.
  • Public spending on social care as a proportion of GDP will fall back to around 0.9 per cent by 2019/20, despite the ageing population and rising demand for services. This will leave thousands more older and disabled people without access to services.

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