CIPFA insight: more medicine needed


On 22 May CIPFA released a report claiming that the government’s Five Year Forward View for the NHS, published in 2014, is already outdated.


Download 'More Medicine Needed: the Health of Health Finances Revisited' (PDF, 675 KB)

Following on from the £2.45bn NHS overspend just announced for 2015/16, the report 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.

New charges or healthcare rationing?

More Medicine Needed cautions 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%).

The story was taken up widely in the press, featuring in 240 publications, notably the Sunday Times, the Guardian, the Daily Star, the Daily Mirror, Sky News and the Daily Express. All led with the predicted £10bn scale of the problem and several went on to report on the proposal to set a ‘golden ratio’.

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 to 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 link health funding to the GDP. This will give a clear commitment to the public and shield the NHS from political short-termism.”

The shortfall is due to a combination of insufficient financial support, increased pressures from new commitments and a growing and ageing 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 this year’s 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.