£10bn black hole likely by 2020, as NHS retreats to quick fixes

23-05-2016

The government’s Five Year Forward View for the NHS, published in 2014, is already outdated as extra money for investment is used to plug short-term gaps, a report by the Chartered Institute of Public Finance and Accountancy (CIPFA) claimed today.

The report, More Medicine Needed, warns that the NHS could well overreach its budget by £10bn a year by 2020. Analysis suggests that the NHS will struggle to make £22bn planned efficiency savings by 2020. Furthermore, new pressures have arisen since the plans were set in 2014, and much of the £8bn additional funding announced last year is being used to make ends meet, instead of being invested in projects to save money in the future.

The report warns that new charges or healthcare rationing will have to be introduced, unless taxes are raised to meet the annual £10bn shortfall, which is equivalent to £571 for every working household.

CIPFA has called for an independent commission to establish a ‘golden ratio’ of GDP spend on healthcare. UK spending on health is expected to be 7% of GDP by 2020, well below other countries such as France or Germany (11%), let alone the US (18%).

Rob Whiteman, Chief Executive of CIPFA, said:

“The NHS faces a shortfall of £2.45bn this year and that’s likely to grow to £10bn by 2020. The Five Year Forward View, an attempt bring long-term planning to the NHS, has floundered after just one year.

“Failure of long-term financial planning will degrade services and cost more in the end. We’re seeing a worrying trend toward centralised control and a health service falling into a desperate scramble from one year to the next.

“The UK spends among the lowest of any developed nation on health, it is not enough. To protect the NHS, and the considerable value for money it offers, the government must show leadership.

“Today, I’m calling for an independent commission, to set a golden ratio of GDP spend on healthcare free from short-term political priorities.”

The shortfall is due to a combination of insufficient financial support, increased pressures from new commitments and a growing and aging population, and unrealistic saving targets.

The government estimated that the pressures on health will likely cost £30bn by 2020, which it intends to address with £22bn efficiency savings and £8bn additional funding in the Spending Review 2015.

CIPFA’s analysis suggests that the cost of increasing demand will in fact be in the range of £30bn–£40bn, with savings only being in the range of £16bn–£22bn and much of the additional funding has already been used. The 2020 overspend is therefore expected to be in the range of £5bn–£16bn with a most likely scenario of £10bn.

Notes to editors

The Chartered Institute of Public Finance and Accountancy (CIPFA) is one of the leading professional accountancy bodies in the UK and the only one which specialises in the public services. It is responsible for the education and training of professional accountants and for their regulation through the setting and monitoring of professional standards.

Uniquely among the professional accountancy bodies in the UK, CIPFA has responsibility for setting accounting standards for a significant part of the economy, namely local government. CIPFA’s members work (often at the most senior level) in the public service bodies, in the national audit agencies and major accountancy firms. They are respected throughout for their high technical and ethical standards and professional integrity. CIPFA also provides a range of high quality advisory, information and training and consultancy services to public service organisations. As such, CIPFA is the leading independent commentator on managing and accounting for public money.