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They Said They'd Give The NHS More Money...Guess What Really Happened

When is £10 billion not really £10 billion?

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Unless you've been living in a hole, it may have come to your attention that the NHS is in rather hot water, financially speaking. Headlines scream of hospital closures, while the Twittersphere has exploded into debates about who spent how much on what policy, whose fault it all is, and whether we'll all soon be charged a fee to hold our newborns.

It's easy to get confused by all the numbers, particularly when some of them are contradictory or just plain wrong. At the Nuffield Trust we're pretty geeky about getting the facts right. Here we break down some of the most common numbers you might hear about NHS finances – and tell you what they really mean.

1. The funding gap: £30 billion

This is the estimated difference between how much money the government is prepared to give the NHS and how much the NHS will actually cost to run in five years' time – factoring in the rising cost of drugs and patient numbers.

However, since the figure was first calculated back in 2013, the government has pledged to increase NHS spending by an 'extra £8 billion' over the next five years (although this figure is also misleading, see below). This reduces the £30 billion gap to around £22 billion.

2. The ‘extra money’: £8 billion (or £10 billion)

These figures are confusing for a number of reasons.

Both figures refer to the ‘extra’ funding the government claims it will increase NHS spending in England by, above inflation, over the next five years. But the higher (and more often-cited) figure of £10 billion includes money given to the NHS in 2015. This doesn’t make a whole lot of sense, considering that the ‘new money’ pledged for the NHS did not start until 2016-17.

The second problem is that the £8 billion figure (or £7.6 billion to be exact) is based on a sneaky redefinition of what counts as ‘the NHS’. A hefty sum of the ‘extra’ money (£3 billion) given to the NHS is not new money at all, but has instead been taken from budgets that are technically separate, but pay for doctors and nurses’ training, new hospitals and public health services. So while this money might appear generous, it’s actually coming at the cost of initiatives that have a direct impact on the health service.

Without this recycled money, the real increase for the health service for the next five years is just over half what the government claims, at £4.5 billion.

And even then, that figure is a bit of a stretch, since it is based on expected rises in the price of goods across the whole economy, rather than the things the NHS actually buys (like doctors, nurses, medical technology and drugs), which are getting more expensive, much more quickly.

With NHS-specific inflation factored in, the remaining £4.5 billion of new money for the NHS reduces to a measly £800 million.

3. Last year’s overspend: £2.45 billion

This is the amount that NHS hospitals and other service providers reportedly overspent on their budgets last year. Many use this as evidence that the health service still doesn't have enough money. But while the £2.45 billion figure is bad enough, it is actually a significant understatement. This number came about after huge pressure was put on these organisations to use all sorts of one-off changes to their accounts to reduce the size of their deficits.

Once those changes are removed, the real figure is likely to be nearer to £3.7 billion.

So while the government has given the NHS (a little) 'more money' for the next few years, the NHS is starting from a position of not having enough. This is going to make it very hard for the NHS to recover, even with additional money.

4. This year’s overspend: £580 million

This is the deficit NHS hospitals are predicted to be in by the end of next March. Initially, it sounds like quite a turnaround from last year's £3.7 billion. But, as ever, things are not quite as they seem. If NHS hospitals and other providers do manage to report their deficits as £580 million, it will only be because they have been given an extra £1.8 billion this year to bail them out – an implicit acknowledgement by the government of how dire the financial situation has become. Without that, the underlying deficit for the year would actually be £2.4 billion. Even this can only be achieved if hospitals and other providers can find a way to cut their costs by around £3 billion in just one year. That would mean savings of about twice what experts have previously told the government is possible.

And importantly, the money being used to bail out hospitals is being taken from a pot of money intended for investing in setting up new services that keep people healthy and out of hospital in the future. If those services cannot be set up, there is a risk the NHS will have to use other means to stop people coming into hospitals, such as withholding some treatments or closing services.

5. The Brexit money: £350 million

You probably don't need reminding about this one: the now-infamous claim from the EU referendum's Leave campaign, which implied that by leaving the EU we could free up additional funds for the NHS.

The problem with this figure is that while the UK does pay £19 billion a year to the EU (or £350 million a week), it gets a hefty chunk of that back as a 'rebate' – over £4 billion in 2014. And some of that money is already spoken for. The EU today spends billions on British farming, universities and regional development. We will need to set aside a large proportion of our annual savings to replace this funding.

Leave campaigners knew that, and you might have noticed many, including Boris Johnson, now talking about a much smaller boost of £100 million a week (£5 billion a year) for the NHS. That one could actually happen. But there is one last catch, and it's a pretty big one: the predicted economic shock of Brexit could potentially wipe out as much as £40 billion from the public finances.

Summing up

So, the good news is that the NHS funding gap is possibly a bit smaller than you thought.

The bad news is that the extra money will be less than you were led to believe; last year's financial hole is even bigger than it looks, as is next year's; and the Brexit bonus is cancelled.

With another five years of financial squeeze to come, the health service's finances are looking distinctly peaky.

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