NHS finances: the tanker en route for the iceberg

BMJ 2014; 348 doi: https://doi.org/10.1136/bmj.g3129 (Published 08 May 2014) Cite this as: BMJ 2014;348:g3129
  1. Gareth Iacobucci, news reporter
  1. 1The BMJ, London WC1H 9JR, UK
  1. giacobucci{at}bmj.com

Will it hit before next year’s general election?

In a report published last week, UK healthcare think tank the King’s Fund warned that a financial crisis in the NHS was now “inevitable” by 2015-16 and that, without urgent action to plug the funding shortfall, it could arrive sooner.1 Such warnings have become increasingly vociferous in recent months, as fears grow that the tanker may be about to hit the iceberg, to coin the phrase used by former NHS Confederation chief Mike Farrar.2

Before his departure earlier this year, the outgoing NHS chief executive David Nicholson warned that the NHS was facing a £30bn (€36.5bn; $50.8bn) funding gap by 2021, which could render it unsustainable without radical change to the way care is delivered.3 The onus has now fallen on Nicholson’s successor Simon Stevens to leverage this change while keeping the ship afloat, amid what Stevens describes as “the longest squeeze on NHS finances in our 65 year history.”4

Since 2010, there has been an unprecedented slowdown in the growth of NHS funding, as the accelerated investment of the previous decade dried up. The King’s Fund’s report highlights that, between 1997-98 and 2009-10, NHS spending in England more than doubled in real terms, increasing as a proportion of gross domestic product (GDP) from around 5.2% to just over 8%. But it forecasts that NHS spending as a proportion of GDP will fall back to 6% by 2021—its lowest level since 2003—if the current pace of investment continues.

The United Kingdom is also falling behind its G7 counterparts, with the Office for National Statistics revealing last week that 9.2% of the UK’s GDP is currently spent on healthcare (including NHS and private care), less than all other G7 countries apart from Italy.5

Although the NHS has continued to receive modest funding increases since the economic downturn, this has not been sufficient to keep pace with rising costs. To deal with the shortfall, the NHS was set a target of achieving £15-£20bn in efficiency savings between 2011 and 20156—the most ambitious productivity challenge in its history. This has now been extended, with current spending plans anticipating similar squeezes until at least 2021. To date, efficiency targets have been achieved largely through staff pay freezes and management cuts. As the King’s Fund highlights, these have been “all but exhausted.”

Although further efficiencies can be found in the system, the fund argues that more money will be needed to achieve this, with a specific focus on investing in new models of care in primary and community settings. It has also called for shorter term financial support to be provided to struggling organisations, to prevent “damaging consequences” for patient care. When the escalating cost of providing healthcare for an ageing population with complex needs is factored in, the case for additional investment is compelling.

Only 40% of NHS finance directors recently surveyed by the fund were confident that their organisation would achieve financial balance this year (2014-15), and just 16% expressed confidence for 2015-16.7 This is partly down to the proposed transfer of a further £1.8bn of NHS funds to local government next year, to support joint working with social care.

The number of NHS foundation hospital trusts in England in financial difficulty has almost doubled in a year from 21 to 39, according to a recent report from health sector regulator Monitor.8 Having already been squeezed through cuts to their tariffs, hospital providers are bracing themselves to cut emergency and elective work next year.

As he prepares to hold urgent discussions with national and local bodies on how to put the NHS on “a sustainable footing,” Stevens must strike a balance between driving change while supporting struggling organisations. Having overseen unprecedented investment in the NHS between 1997 and 2004 during his previous role as a health adviser to former Prime Minister Tony Blair, Stevens will be acutely aware of the need to invest wisely, albeit without the luxuries available in 1997.

He has already indicated that more resources will be directed towards primary care, which would be consistent with the often cited need to shift more services out of hospital and into the community. Addressing MPs at a parliamentary health select committee hearing last week, Stevens said it was out of kilter that a 21% increase in the number of GPs since 2000 had occurred at the same time as an almost 76% increase in the number of hospital consultants. Although this imbalance needs to be rectified, Stevens cannot allow other parts of the service to wither on the vine. With the 2015 general election around the corner, the government should be mindful that an unhealthy NHS equals an unhappy electorate.

When pressed by MPs as to whether the quality of care and breadth of services currently on offer could be maintained without additional funding, Stevens offered a pragmatic response. “If it is the case that strong economic growth returns, then for medical, economic, and social reasons, most independent commentators would predict that the nation will be spending more in real terms on healthcare by 2021 than it is now,” he told MPs.

Regardless of the state of the economy, there will be justified pressure on whichever party is in government to ensure that the UK does not slide further behind other developed nations in its investment in healthcare. With the iceberg in sight, the time for a full and frank debate about how much the UK values its health service—both literally and figuratively—is overdue.


Cite this as: BMJ 2014;348:g3129


  • Competing interests: I have read and understood BMJ policy on declaration of interests and declare the following interests: None.

  • Provenance and peer review: Commissioned; not externally peer reviewed.


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