One consistency among all the feverish speculation about the spending content of the forthcoming Budget is that the NHS will do better than any other part of the public sector and yet still be underfunded. The challenge for chancellor Rachel Reeves is that because of its third share of total spend any increase in health has a huge impact on the public finances.
The IFS in its recent 340-page Green Budget report said that ‘what happens to the health budget is the most important single determinant of the overall funding picture. This is both because the health service is much larger than other areas of spending and because we assume it receives a higher real growth rate than most other areas (in line with historical experience).'
One example given by the IFS, just to illustrate how large is health's share of the UK's £1.2trn public spending total, showed that an extra £1bn for the health and social care department would represent a 0.5% increase on its budget but 14% for environment, food and rural affairs and 48% for culture, media and sport. The IFS added: ‘In other words, an additional £1bn in funding would be little more than a rounding error within the NHS but could transform smaller public services.
‘Equivalently, seeking to fund even very small percentage increases in the NHS budget through savings elsewhere would require deep cuts to smaller departments and potentially drastic changes in service provision.'
Reeves has signalled the NHS will be a priority even as she tries to fill the £22bn black hole she says she inherited while also planning for the next three years despite that Health and the Home Office are the only departments to have seen a real-terms increase in day to day spending between 2009/10 and 2023/24. Labour's manifesto included pledges for 40,000 more NHS appointments per week but outside the manifesto Labour has also pledged to return NHS elective waiting times to their 18-week standard.
The IFS estimates NHS spending as a share of GDP is 1% higher than in 2018/19 but this is way below inflation. In its recent ‘Green Budget' report the IFS said that since 2021 ‘the Department of Health and Social Care has received billions of additional funding and so has seen a smaller reduction in its real growth rate (from 4.1% to 2.8%) than justice (from 4.0% to 0.8%) or the Home Office (from 2.3% to minus 2.1%).'
But the NHS Long Term Workforce Plan also aims to increase the number of staff from 1.75m in 2023 to between 2.3m and 2.4m by 2036/37, which means NHS pay may have to rise faster than that in the wider economy to ensure NHS careers are sufficiently attractive. Then there is capital spending needed for urgent upgrading of the NHS estate and investment in technology as stated in the Darzi report.
The Budget will confirm final figures for 2024/25 taking into account overspends which are numerous, and the detailed allocations for 2025/26 in a one-year Spending Review. This is problematic as the last Government only factored in 1% rises for most departments outside health and this excludes recent pay rises.
The chancellor will also decide the overall spending for 2026/27 onwards. Then the next Spring Statement will confirm the pots for Whitehall departments up to at least 2028/29.
Among the many uncertainties surrounding the Budget there is one certainty: a lot of overtime is being undertaken by Treasury number-crunchers.