NHS funding data analysis

Our analysis looks at NHS and social care funding - how it has changed over time, the impact of COVID-19, regional differences and growth.

NHS pressures waiting list

Healthcare spending has increased over the years and will need to further increase as the population grows and more are living longer.

Growth of funding over the past decade, prior to COVID-19, was below the long-term average and did not keep pace with demand.

Although additional significant and necessary funding has been provided during the pandemic, the historic lack of funding meant the NHS was unprepared for a major health crisis. It will take time and investment to put the NHS back on a sustainable footing.

This page provides analysis of healthcare spending in the UK, highlighting how it has changed over time and the variation across the UK.

 

The Department of Health and Social Care’s budget

Spending on healthcare is broken down between:

  • capital funding - spent on assets such as hospitals
  • revenue funding - spent on day-to-day costs such as salaries, which is what the majority goes of spending goes towards.

DHSC is responsible for health and social care funding in England, and each UK nation has responsibility over their own healthcare budgets. Funding for health and social care is allocated separately to other UK nations through the Barnett formula.

2020/21 is the most recent year that breakdowns of funding are available for in the DHSC annual accounts. In 2020/21, DHSC's revenue expenditure was £180.2bn for day to days costs, and £12.7bn was capital expenditure.

The vast majority of the DHSC budget goes to NHS England, and funding is also provided for Health Education England, Public Health England (now replaced with the UK Health Security Agency and the Office for Health Improvement and Disparities) and other arm's length bodies.

Out of the day to day spending for that year:

  • £13.9bn was spent on primary care
  • £67.4bn was spent on provider staff costs
  • £28.0bn was spent on procurement.

 

Health spending during COVID-19

Emergency funds

During the pandemic, the Government provided significant emergency funds to DHSC to support the response to COVID-19. In England, around £47bn ringfenced funding was allocated to the DHSC budget in 2020/21, and so far for 2021/22, at least £34bn has been provided.

A large proportion of this has gone to NHS Test and Trace. An estimated £37bn was allocated for NHS Test and Trace over the past two years, although it had an underspend of around £9.3bn in the first year of the pandemic.

Health and social care levy

The Government announced the health and social care levy in 2021 and expects to raise around £12bn a year across three years from 2022/23 to 2024/25 for health and social care.

Over the spending review period, the Government plans to:

  • allocate £9.6bn for COVID-19 programmes and spending, such as testing and vaccinations
  • provide around £8bn for the backlog of elective care in England, in addition to the £2bn previously provided - although this is significant funding, estimates from the Health Foundation suggest that up to £17bn is needed, far above the £10bn currently pledged
  • provide £5.4bn towards adult social care, with £3.6bn going directly to local government and £1.7bn to improve the wider social care system.

Capital investment

In addition to the funding from the levy, additional capital investment was announced in the 2021 autumn budget and spending review with the goal of helping to clear the elective backlog. This includes:

  • £2.1bn towards digital transformation and technology in the NHS, with £250m initially being allocated to integrated care systems as they develop their digital investment plans
  • £2.3bn towards diagnostic services, with the aim of providing 100 community diagnostic centres
  • £1.5bn towards new surgical hubs, equipment and increased bed capacity.

 

Health spending before COVID-19

Additional COVID-19 funding has meant that investment throughout the pandemic reached close to where it would have been had growth in spending not fallen over the past decade.

This still means that the NHS is playing catch up to where it should have been and it hasn’t been able to invest in key areas, particularly in the workforce.

Growth in health spending across all departments has not been consistent over the lifetime of the NHS. Increases in spending over the decade before the pandemic were significantly below the long-term average.

Overall, however, healthcare spending has increased significantly since the NHS was established in 1948. It reached £172bn for the UK in 2020/21, without spending on COVID-19. When including spending on COVID-19, it reached more than £219bn.

 

 

Variation in health spending across regions

Healthcare spending is uneven across the UK. In the five years before the pandemic, healthcare spending per person was lowest in England compared to each of the UK nations and spending in Northern Ireland was highest.

There is also significant variation between regions in England. London has the highest healthcare spend per person, and the south east has the lowest, with more than an £800 (37%) per person difference in 2019/20.

Significant differences in per person healthcare spend can result in differences in care they receive.

OECD data suggests that in 2019, the UK was spending around 10.2% of GDP on healthcare, and this was fairly stable over the past decade.

Until 2019, healthcare spending in the UK as a % of GDP had historically been slightly below many comparable countries, such as France and Germany.

In 2020, OECD data suggests that spending as a % of GDP increased substantially for many countries, and significantly increased for the UK in particular.

The impact of COVID on the overall economy (the UK had the largest drop in GDP of the G7) and the UK being behind in terms of investment at the onset of the pandemic likely impacted this.

 

Is healthcare funding adequate?

The funding pledged provided by the Government through the health and social care levy and the spending review are considerable increases in funding and are welcome. However, it is important that decision makers invest the funding where it is needed most, and that funding does not drop while the NHS recovers from the pandemic. Funding is still needed to bridge the gap between the estimated £17bn cost of tackling the backlog and the £10bn currently allocated. 

There are areas in which planning and investment are desperately needed which have not been addressed, such as managing chronic workforce shortages, as greater funding will not be effective if new services don’t have adequate staff to provide care safely.

The BMA submitted a representation to the previous spending review highlighting the areas that need investment. These calls, alongside more detail on the Government’s announcements can be found in our autumn budget and spending review analysis.