We have set out below the trends for health budgets in the UK and in England focusing on total budgets and resource budgets only.
For more detailed analysis of capital funding in England and the UK, see our Capital funding analysis page.
Nominal terms vs real-terms budgets
Budgets can be expressed in nominal terms (the cash or ‘face’ value of the budget at the time it was announced) or in real terms (the value of the budget adjusted for inflation). This page uses the real-terms value of budgets in 2023/24 prices, using March 2024 GDP Deflators.
Health spending can be measured in different ways, from government departmental budgets to health expenditure. Our analysis below uses two different measures:
- Department of Health budgets. HM Treasury statistical data sets out annual information on government spending and provides long-term historical data on departmental budgets and the amount allocated to the DHSC (Department of Health and Social Care).
- Health Expenditure. Beyond the spending of the DHSC, other departments do have expenditure that can be classified as health spending – such as the Department for Science, Innovation and Technology spending on health research. Departmental spending is broken down by the Treasury according to its function, including health. This allows for standardised cross-country comparators.
Health funding in the UK
How health budgets are allocated in the UK
Since health is a devolved matter, each UK nation has responsibility for their own healthcare budgets. Funding for the NHS in England comes from the Department of Health and Social Care. Funding for health and social care is allocated separately to other UK nations through a block grant, which provides an equivalent, population-adjusted level of funding for health and care – although each nation can choose how much they spend on the health and care system.
However, we can look at cumulative health expenditure for the whole of the UK to identify nation-wide trends in health spending and to make international comparisons.
Health spending in the UK tends to increase every year, but so does demand for healthcare
Health expenditure – the money spent on health across all government departments – has increased significantly over the decades since the NHS was established in 1948. Even when accounting for inflation, health spending tends to increase year on year. In recent years, it has increased even more than usual due to additional COVID-19 funding.
The UK is not alone in this. Health spending has increased over the decades in nearly all comparable countries. This is due to population growth, ageing populations with increasingly complex healthcare needs, and increases in the relative costs of treatments including drug prices. When looking at real-terms health spend per person, annual real-terms growth is more modest.
Health spending growth has been below average since 2010, resulting in a cumulative underspend of hundreds of billions
Growth in health spending has not been consistent during the past few decades, and the annual growth rate of real-terms expenditure varies significantly. However, in the decade preceding the pandemic, annual spending increases were significantly below the long-term historical average for nine subsequent years. This has resulted in a large cumulative underspend since 2009/10.
How the UK compares internationally
International comparisons in healthcare expenditure can be done in different ways. One way is to look at health expenditure as a % of GDP, which shows how much is spent on health relative to a country’s economy. Another way is to look at health expenditure per head of population, which shows how much is spent per person.
When looking at expenditure as a % of GDP, UK spending is about average. However, this is partially because GDP growth in the UK has been sluggish since the pandemic. Prior to the pandemic, healthcare spending in the UK as a percentage of GDP had historically been below many comparable countries such as France and Germany. When looking at health spend per person – and accounting for the spending power of different currencies – it is clear that the UK spends less than many comparable nations.
Health funding in England
Health budgets have been eroded by inflation
The day-to-day budget for the Department of Health and Social Care tends to increase in real terms every year. This is necessary because healthcare is increasingly expensive due to population growth, ageing populations with increasingly complex healthcare needs, and increases in the relative costs of treatments including drug prices.
However, the DHSC day-to-day budget has fallen in real terms for three consecutive years between 2021/22 and 2024/25.
What is more, these real-term budget cuts have now offset COVID spending increases. Though the pandemic triggered huge cash injections into the DHSC budget, subsequent real-terms cuts mean that spending for the coming year is now lower than where it would have been if, instead, the budget was increased by the historical average of every year since the start of this Parliament.
The vast majority of the DHSC budget goes to NHS England. The day-to-day budget for NHS England has also seen real terms cuts in recent years. Even increased spending during the pandemic does not make up for these cuts: real-terms spending for the NHS this year is lower than where it would have been had the historical average growth rate been kept up during this Parliament.
Though modest growth for the NHS budget is expected in 2024/25 compared to 2023/24, it is well below the long-term average growth rate for this budget and does not make up for past underspending.
This comes at a time where the NHS is struggling with the growing burden of waiting lists and an ageing population. What is needed are real-terms increases, not real-terms cuts.
What is more, if the Government wants to meet its commitments in the Long-Term Workforce Plan, more funding will be needed. The Institute for Fiscal Studies estimates that the plan implies annual NHS budget increases of around 3.6% per year in real terms.
Regional variation in England
We can also look at health expenditure by region. There is significant variation between regions in England, with London having the highest healthcare spend per person, and regions in the East (East of England, South East, and the East Midlands) among the lowest in terms of spend per person. In 2020/2021, spending per person fell in real terms in all English regions.
Significant differences in per-person healthcare spend can result in differences in the care people receive. However, regions with lower levels of health may receive more health funding, insofar as funding allocations for different geographical areas take the demography and health needs of the population into account. In part, this explains the geographical differences.
What the BMA is doing
It is clear that health budgets are not growing fast enough to keep up with demand. Staff have also had to put up with sub-inflationary pay rises since 2008, leaving them feeling undervalued and burnt out.
The BMA continues to lobby the Government on this issue, for example through submitting regular representations to the Treasury in advance of fiscal events. Submissions can be accessed on our website.
