The analysis, which is part of the Health Foundation's response to the Treasury's Spending Review, highlights the potential for a significant shortfall in NHS funding unless unprecedented productivity growth can be achieved.

Anita Charlesworth, senior economic advisor and co-chair of The Health Foundation's NHS productivity commission, said: ‘The Government has set a huge task for the NHS to consistently deliver 2% annual productivity growth. Our new analysis underlines how important it is for the NHS to improve productivity and the potential funding shortfall that could emerge if it doesn't.

‘If the NHS is unable to meet the Government's target then this could create a significant fiscal headache for Government who will be faced with either having to find the money from elsewhere or scale back what the NHS is able to deliver.'

The report says if the NHS achieves 2% productivity growth from 2021/22 to 2028/29 (in line with the Government's target for improving productivity), the NHS revenue budget would need to rise to £198bn in 2028/29.

However, if productivity growth is only 1% over this period (in line with the long run average), NHS funding would need to rise to £211bn by 2028/29.

The Foundation's response to the Spending Review also reiterates the importance of capital investment, estimating capital spending would need to grow by 10.2% annually between 2024/25 and 2029/30 to match the capital investment levels of comparable countries and compensate for a decade of low investment.

Reaction

Interim chief executive of NHS Providers, Saffron Cordery, said: ‘To make the NHS as productive as possible requires long-term, cross-Government support plus increased capital investment and urgent social care reform to ease mounting pressure across the NHS.'

Matthew Taylor, chief executive of the NHS Confederation, said: ‘NHS leaders have told us that additional capital investment is crucial to improving performance and reducing long waiting lists. That is why the additional capital investment the Government announced in October's Budget was so warmly welcomed. But this still at least £3.3bn short of the £6.4bn a year additional capital investment needed to help boost NHS productivity growth to 2% per year.'

NHS Confederation is calling for the NHS to have more options to support capital efficiency, including private investment.

A Department for Health and Social Care spokesperson said: ‘This Government inherited a broken NHS with outdated equipment and inefficient processes causing delays in patient care.

‘We have set the NHS a tough but achievable target for increasing productivity by 4% next year as well as reducing costs, and we are giving them the tools to do so.

‘We are bringing our analogue NHS into the digital age, cutting out millions of pointless and missed appointments, and holding the NHS to account through league tables.'