The crisis engulfing the health service is plain to see. With each new development, a rash of analyses of the problem in public debate follows, backed up by simplistic solutions arguing against the NHS model and its core tenets. The amount of money spent on health care by the government is fertile ground for this kind of poor-quality analysis of the NHS. This is even more the case when international comparisons are brought in as evidence.
“The NHS receives a record amount of money”
Given inflation and population growth, it would be surprising if the amount we spend on health care had not grown: it has indeed grown four-fold in real terms in the last 40 years. But when we adjust the Department for Health and Social Care budget to factor in the ageing and growing population, we can see that there has been a long period of stagnation (see chart below).
This is even more of a problem than it first appears, because recent data suggests that, due to increased survival, older people are actually less healthy on average than they were 15 years ago. During this time of virtually flat spending, new technologies and drugs have been introduced – and yet the only way of funding these has been through internal efficiencies. This clearly cannot be sustained indefinitely.
Health as a proportion of GDP: unpicking the statistics
A number of recent articles have pointed out that, when compared to other OECD countries, we are already spending above the average as a percentage of GDP. It is also commonly argued that the NHS is a ‘bottomless pit’ and is consuming an ever-greater proportion of government spending – at the expense of other services.
Before examining this, it is worth unpicking the statistics that are generally used. The proportion of GDP that is spent on health is often quoted. It is true that the UK generally spends above the OECD average as a proportion of GDP. However, as the chart below shows, it is rarely among the highest spenders.
The OECD also includes countries with less comparable economies, such as Colombia and Turkey. When compared only to western European and G7 countries, the UK usually spends slightly less than the average proportion of GDP. Choosing different countries for comparison can give almost any result, because the UK spends less than most of its northern European neighbours but more than most southern European countries.
Recently, data from 2020 and 2021 have been used to argue that we are near the top of the spending distribution. This is a misleading claim. The jump in spending in 2020 and 2021 was on Covid-19-specific activities outside of what the NHS usually does – including the UK’s very expensive Test and Trace programme. In the anomalous year of 2020, UK GDP also fell especially sharply because of the impact of lockdowns on its service-based economy and because it made a greater effort than some other countries to reflect the impact of these lockdowns on public services.
Even so, the assertion of higher spending is incorrect on the latest data: Canada, France, Germany and the USA all had significantly higher spending in that year.
Using health care spending differently
Comparing spending by drawing on the proportion of GDP spent on health care is also not the best reflection of the resources the NHS has. The UK has a lower GDP per person than most western European and Anglosphere countries due to weak economic growth, which means that the actual amount spent is lower than in comparable countries. A more meaningful comparison could be made using the actual amount of money spent per person. This has to be adjusted for differences in purchasing power between countries (purchasing power parity), but when doing so it is clear that the NHS is less well placed.
Furthermore, the UK has a different pattern of health care spending. In particular, it has cut back on investment in buildings and equipment, which has been very low for most of this period, so that the NHS has less to work with than might be expected at this level of spending.
So, while it may be that the NHS needs more money, it probably needs capital and investment in training rather than just more money for services. The UK has been a very notable outlier in terms of capital spending.
This also translates into relatively low levels of high-cost equipment, such as CT and MRI scanners and radiotherapy machines, which may well have implications in areas such as successful cancer treatment, and in terms of buildings, which is why backlog maintenance in the NHS is now almost £10 billion.
Poor outcomes: not just about money
The poor outcomes of the NHS in several key areas are well documented. From heart attack, to stroke, to cancer, mortality rates are higher than the average among western European and Anglosphere countries. But the reasons behind these poor outcomes are complex and include our high levels of inequality, our cultural attitude to seeking health care, and the underlying health of the population. Some aspects of the NHS and how it is organised and financed also explain this – for example the underinvestment in scanners and diagnostic equipment mentioned above. But the argument that poor performance is the result of the choice of organisational and funding model has not been convincingly made – not least because other countries that outperform the UK have lower spending than the UK.
Putting together the spending and outcomes data, the overall conclusion is that broadly, given the nature of the population, the levels of inequality and other factors, we get roughly, or a little less than, what we pay for.
Edwards N (2022) 'Myth #1: “We already spend too much on health – and despite this our outcomes are poor”'. Nuffield Trust blog, 19 October.