Funding & cuts

The NHS has been widely regarded as one of the most efficient healthcare systems in the developed world. For example, a study comparing the healthcare systems of 11 countries between 2011 and 2013 found that the NHS scored highest on quality, access and efficiency (

But by 2016 the picture is becoming very different. Good access to services and high quality of care are at risk, largely because of insufficient funding of the NHS: we are now experiencing the biggest sustained fall in NHS spending in any period since 1951.  Once adjusted for inflation, spending on the NHS in England has been increasing by only 0.9% a year (on average) – well below the 3.7% growth rate that the UK health service has been used to in the past. But even worse, once inflation that is specific to the NHS is taken into account, the real increase in funding is just 0.2% per year (

At the same time that funding is getting tighter, the NHS has to cope with:

  • An increased need for services – for example, as a result of increased incidence of obesity and diabetes ;
  • A 4% increase in the costs of new medical treatments;
  • The annual transfer of NHS funds to the Better Care Fund (£3.8 billion from 2015). This Fund was set up to support the integration of health and social care, largely by cutting hospital care for those who are chronically ill and the frail elderly and replacing it with supposedly cheaper care in the community;
  • A cut of £200 million in Local Authority public health budgets which fund many services such as school nursing, screening programmes, and smoking cessation programmes – despite recognition by the boss of NHS England of the need for “a radical upgrade in prevention and public health”.  It is feared that this cut will not only affect preventative and public health services but will also have a serious knock on effect on NHS healthcare services.(;
  • A cut in the money paid by the government to NHS providers for their work under the Payment by Results system from 2010/11. Over three-quarters of each hospital’s funding has come from this system through which hospitals are paid per treatment, according to prices set by a tariff. In recent years, payments have been cut by over 40% for a quarter of the treatments that hospitals provide ( So, for example, a hospital providing routine knee surgery would have been paid £3,077 for each procedure in 2009/10, but by 2013/14, the hospital would have received £1,673 for the same procedure.

Cuts to tariff payments made up nearly half of the £20 billion ‘efficacy savings’ that the NHS was told to achieve by 2015 under the ‘Nicholson Challenge’, dreamed up by the last Labour government and included in the NHS funding settlement agreed by the Coalition Government when it came to power.

Cuts, the Five Year Forward View, and Sustainability and Transformation Plans

The NHS England’s Five Year Forward View (FYFV) that set out plans for the NHS from 2015 to 2020 estimated that the NHS would need an extra £30 billion by 2020 to deal with growth in healthcare need, the emergence of new treatments, and so on. Of this figure, the FYFV suggested that the government should provide £8 billion, while £22 billion could be found from within the NHS through further ‘efficiency’ measures’: NHS England wants to see ‘productivity gains’ of 2-3% each year between 2015 and 2020 (see This is highly ambitious compared with the kind of efficiencies achieved by the wider UK economy or the health care systems of other countries. These ‘efficiencies’ may also bring safety risks in a service where every ounce of fat has already been cut.

In response to the FYFV, the government promised to give the NHS more than it asked for – a sum of £10 billion (a sum it later admitted was to cover six years rather than five). But many say that the £10 billion figure is misleading and it’s really closer to £8 billion.

What’s more, this money is only available through cuts of over 20% between 2015/16 and 2020/21 to the wider health budget. Due to a redefinition of what the NHS covers, a range of services – like public health, staff education and training, health visiting, sexual health and drug and alcohol services – now come under the wider health budget, not the NHS per se. As a number of think tanks like the Nuffield Trust, The Health Foundation and The King’s Fund have calculated, total health spending in England (i.e. not just for the NHS) will rise by only £4.5 billion in real terms between 2015/16 and 2020/21. This figure is also expected to cover implementation of new initiatives outlined in the FYFV, such as the cost of moving to a seven-day NHS (See, for example, the British Medical Association’s briefing “NHS funding and efficiency savings” and’s-spending-review.)

Of the £22 billion that the Five Year Forward View expects the NHS to achieve through ‘efficiency savings’, these are to be found, for example, by

  • restructuring the NHS (again) through introducing new models of care that share similarities with Accountable Care Organisations (ACOs) found, for instance, in the US. ACOs aim to reduce costs by bringing in economies of scale and introducing higher thresholds for treating patients;
  • restructuring the NHS workforce through bringing in new, more ‘flexible’ roles  carried out by less qualified staff, and weaker rules about pay and conditions (such as a significant reduction in real term salaries for many staff); and
  • reducing red tape and reduced waste.

These savings are to be ensured by a carrot-and-stick approach: in 2016 NHS England directed in 2016 that the NHS in England is to be divided into 44  new ‘local health systems’ or ‘footprints’ and that each will produce a ‘Sustainability and Transformation Plan‘ (STP). Each footprint will show in its STP how it will transform the way it plans and delivers health and care services in line with the FYFV.  But most importantly, each ‘footprint’ is expected to show how it will cut expenditure and stay within budget through, for example,

  • moderating ‘demand’ (reducing the number of patients trying to access services),
  • increasing productivity (cutting the budgets for service providers, reducing the pay bill, reducing the number of hospital beds etc), and
  • generating income (potentially from private patients or selling land).

The Health Secretary has made it clear that Trusts must balance their books or their governing boards could be removed. An extra £1.8 billion ‘transformation fund” that George Osborne announced for 2016-17 is only available to NHS trusts that promise to meet a huge range of demands, including moving to seven-day services ( (See also our page on Sustainability and Transformation Plans)


The effects

A growing number of health care leaders are expressing concerns about a funding crisis in the NHS. For instance, in November 2015 the chair person of St George’s Hospital Trust in London warned that the NHS faces “wide scale financial collapse” if the government does not provide at least a further £4 billion each year. Similarly, NHS Providers, the body that represents hospitals across England fears that the NHS is close to breaking point because of its escalating cash crisis as a result of years of underfunding. According to NHS Provider’s Chief Executive,

“the NHS is increasingly failing to do the job it wants to do and the public needs it to do, through no fault of its own.”

And because the funding is ‘front loaded’ (i.e the amount is higher in the earlier years), the Director of Policy at the King’s Fund has said

“The government will either need to find more money for the NHS in 2018-19 and 2019-20, when funding will barely increase in real terms, or else be honest about what the consequences of not doing this are likely to be.”
(cited by the Guardian, 1.11.16, p.15)

Similarly, in October 2016 members of the House of Commons Health Select Committee said that the NHS is “doomed to fail” without financial investment.

Findings from a 2016 study of 99 Clinical Commissioning Groups (CCGs) – around half of those in England – indicate the extent of the cutbacks that are planned over 18 months:

  • one in three CCGs expect to close or downgrade Accident and Emergency departments,
  • one in five expect to close consultant-led maternity services, forcing women in labour to travel further,
  • more than half intend to close or downgrade community hospitals,
  • 46 per cent are planning an overall reduction in inpatient NHS beds,
  • one-quarter expect job cuts in hospitals, and
  • almost one-quarter expect to close inpatient paediatric departments. (

Over the past 26 years the number of available hospital beds in England has more than halved, especially those for people with learning disabilities, mental illness and for longer-term care of older people. Statistics from the Organisation for Economic Co-operation and Development show that among 23 European countries, the UK has the second lowest number of hospital beds per capita – and this is before the bed closures that NHS England expects to see set out in the new footprints’ STPs (

And even before these closures there has been an increase in the occupancy rates for acute beds from 87.7 per cent in 2010/11 to 89.5 per cent in 2014/15. The National Audit Office has suggested that hospitals with average bed occupancy rates above 85 per cent will have regular bed shortages, periodic bed crises and increased numbers of health care-acquired infections (

With a deficit of over £2 billion forecast for NHS providers (e.g. Foundation and NHS Trusts) during 2015/16,  NHS  Improvement – the organisation that oversees service providers – is saying that the NHS is unaffordable. It is therefore asking providers to

  • cut costs,
  • fill only essential vacancies,
  • reduce staffing levels
  • adopt safe staffing guidance “appropriately and proportionately” (work on national guidance for safe staffing levels has already been stopped),
  • transfer patients to where there is spare capacity, and
  • consider the financial impact of managing waiting lists as well as patient experience (in other words, make patients wait longer in all but exceptional circumstances).

It seems that balancing the books is taking priority over staffing levels and patient safety (see and

Some health leaders are also talking about the necessity in future to stop funding a wide list of procedures on the NHS, including hearing aids, cataract operations, vasectomies, and hip and knee replacements, if not withdrawing treatment from patients with ‘unhealthy lifestyles’ (

Repeatedly the government’s message is that managers are not to cut frontline services. But it has quickly become evident that many Trusts cannot find ways of reducing costs without cutbacks to patient services.

See also our page on the long-term sustainability of the NHS 

Further reading (The Barker Review)

For information about government funding for the NHS see

Francis R (2013) Report of the Mid Staffordshire NHS Foundation Trust public inquiry.

For an argument on how the ‘need for austerity’ is being used as a strategy for introducing rapid social change, not least dismantling the welfare state, see

For information on the stopping of evidence-based work on setting safe staffing levels, see

For details of members of the House of Lords NHS Sustainability Committee

For an explanation of NHS payment systems, such as Payment by Results, see

updated November 2016

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