NHS in Wales could face £2.5 billion funding gap within ten years, new research reveals

The Nuffield Trust today published analysis into the growing pressures on the NHS in Wales.

Press release

Published: 17/06/2014

Growing pressures on the NHS in Wales means it could face an unprecedented funding gap of £2.5 billion by 2025/26, worth over two-fifths of its current annual budget, new analysis by the Nuffield Trust finds today.

This estimated shortfall, caused by the combination of rising costs and tight public finances, would occur if funding rises in line with inflation beyond 2015/16 (known as flat real terms spending), even after accounting for the efficiency savings currently being made in the Welsh NHS.

To close the gap without additional funding, the Welsh NHS would have to improve productivity at a record rate and sustain this for a period not seen either in the history of the NHS or other countries’ health systems.

If funding were to rise in line with the current projections for the UK economy, the NHS in Wales would still face a substantial, but not unachievable challenge over the next decade Adam Roberts, lead author and Senior Analyst at the Nuffield Trust

The analysis also shows that the immediate financial shortfall to 2015/16 can be significantly reduced – from £1.2 billion to £0.2 billion – if efficiency gains currently being made in NHS Wales are fully realised.

The research, conducted by independent health think tank the Nuffield Trust and commissioned by the Welsh Government, replicates modelling used to calculate the shortfall facing the NHS in England.

It explores the reasons for rising pressures on the NHS in Wales, finding that the ageing population, rising hospital admissions for people with chronic disease and increases in the cost of providing health care mean that pressures on the Welsh NHS are set to grow at 3.3 per cent per year up to 2025/26.

Exploring different scenarios, researchers show that if funding for the NHS in Wales rises in line with national income beyond 2015/16, the funding gap would be reduced to £1.1 billion. While still a sizable shortfall, this gap could be largely closed through sustained productivity gains and improved treatment for chronic conditions.

By contrast, if spending on the NHS in Wales is not increased either in line with inflation or national income but is instead held steady in cash terms after 2015/16 (a real terms cut), the gap could be as large as £3.6 billion by 2025/26.

Adam Roberts, lead author and Senior Analyst at the Nuffield Trust said:

“Our analysis reveals, for the first time, the scale of the task ahead regarding the Welsh NHS’s finances. Money for the service is already tight – NHS funding is likely to be 3.6 per cent lower in real terms at the end of the next financial year than it was in 2010/11 – but the big unknown is what will happen after the 2015 spending review.

“Our models show that, on the central scenario – maintaining NHS funding level in real terms from 2015/16 – the NHS in Wales is looking at a shortfall worth over two-fifths of its annual budget by 2025/26.

“If funding were to rise in line with the current projections for the UK economy, the NHS in Wales would still face a substantial, but not unachievable challenge over the next decade.”

To understand the nature and extent of pressures on the NHS, the Nuffield Trust examined the demographic characteristics of the different health boards in Wales.

While population growth is an important driver of demand for health care, pressures are greatest in areas with the fastest growth in people aged 65 and over, such as Powys. Rising numbers of prescriptions and wages are also likely to be important drivers of the cost pressures facing the NHS.

Nigel Edwards, Chief Executive at the Nuffield Trust said:

“If the NHS in Wales is not going to eat up an ever bigger share of the public sector pie, the question of how to meet demand for the NHS within scarce public finances needs to be resolved. Helping people stay healthier for longer and managing chronic conditions better will be a vital part of this, especially in areas of the country where pressures on the NHS are highest.

“But these measures alone won’t close a £2.5 billion gap. The Welsh Government – like all others across the UK – will have some difficult decisions to make about NHS funding and services immediately after the 2015 General Election.

“It will be important to have an honest and open debate with the public about what this means both for the Welsh NHS and for other public services.”

Notes to editors

  • In 2012 the Nuffield Trust published ‘A Decade of Austerity’, which modelled the shortfall facing the NHS in England. Under Nuffield Trust calculations, a funding gap of around £30 billion will be facing the English NHS by 2021/22 if funding remains flat and productivity gains are made.

Comments