The Autumn Statement offered less of a bitter pill for the NHS than many feared. The Chancellor’s mixed menu of “stealth” taxes made possible by high inflation meant less public sector austerity than many commentators had been prepared for. Planned NHS spending has been boosted in cash terms by £3.3 billion for each of the next two years.
But as Nigel Edwards said, the combination of high inflation and the needs of the ageing population mean that this cash injection will cover a lot less health care than first impressions suggest.
Last month John Appleby and Sally Gainsbury explored what the Department for Health and Social Care’s budgets look like when you adjust the headline spending numbers for the age and size of the population. This gives a more accurate presentation of where additional spending is directed: someone in their mid-to-late eighties on average consumes around 10 times as much hospital-based care as someone in their early twenties.
Using estimates of the costs of hospital-based care for different age groups, our analysis showed that, on average, health care spending per person in England grew by around 2.6% a year in real terms between 1979/80 and 2020/21, after changes in the demographic structure are taken into account.
Applying this method to the new money announced in the Autumn Statement and building in the new (and surprisingly low) estimate of inflation based on the government’s preferred measure of the GDP deflator, we can see that annual increases in age-adjusted health care spending falls to just under 1% for the two years to 2025. Of the new money announced yesterday, this leaves £795 million to improve services and reduce waiting times next year – equivalent to £13 per head.