1. © Nuffield Trust The Funding Outlook for Health Anita Charlesworth Chief Economist March 2013 Twitter: #NTSummit

2. © Nuffield Trust UK Health Spending, government spending and tax 1978-79 to 2016-17

3. © Nuffield Trust The magic circle: health spending increases rapidly, overall public spending and tax falls In 2016-17 spending as a share of GDP and receipts as a share of GDP will be at the average for the 20 years pre-crisis (40% and 38%). 2 key differences: Health spending will be much larger (2 percentage points of GDP) and spending on other public services will be at the share last seen in at the end of 1990’s. Share of GDP Total Public Spending Health spending Other public services Welfare and debt interest Receipts 1978-7945.1%4.4%25.9%14.7%40.1% 2007-0840.7%7.1%20.3%13.2%38.6% Difference- 4.4+2.7-5.6-1.5 Source: OBR, HMT PESA 2012

4. © Nuffield Trust The impact on aggregate public spending

5. © Nuffield Trust Closing £13 billion Funding Gap: 2010/11 to 2014/15 Disease management: £3bn Acute QIPP Actions: £4bn

6. © Nuffield Trust Initial Progress in 2011-12? ExpectedActualDifference Emergency Admissions trend5,784,3765,411,015-7% Emergency Admissions with QIPP actions5,648,2345,411,015-4% Emergency Bed Days trend39,639,52035,600,921-11% Emergency Bed Days with QIPP actions37,352,52835,600,921-5% Planned Admissions trend8,766,9578,735,5840% Modelled Planned Bed Days16,747,17316,555,415-1% Planned Bed Days with QIPP actions16,159,54916,555,4152% OP Appointments67,079,97572,799,6628% OP Appointments with QIPP actions62,572,38872,799,66214% A&E Attendances trend15,503,66217,602,05512%

7. © Nuffield Trust Variation in labour productivity at selected providers in England: 2006/07 to 2011/12

8. © Nuffield Trust Percentage changes in spending by type of care: 2010/11 to 2011/12

9. © Nuffield Trust Closing £11 billion Funding Gap: 2014/15 to 2017/18 Releasing semi-fixed costs: £2bn Disease Management: £2bn Continued Pay Restraint: £3bn Remaining Gap: £3bn

10. © Nuffield Trust Earnings will be key 2011201220132014201520162017 Nominal average earnings growth 2.22.72.22.83.74.0 GDP deflator 2.72.32.0 Nominal NHS pay bill per head growth 1.7 2.5 ??? Source: OBR 2012, NHS employers 2012

11. © Nuffield Trust Conclusions From 2010/11 to 2014/15 the NHS faces its tightest budget of last 50 years. This period of austerity is likely to extend at least until 2017-18. Only a even larger cut in other public services or welfare or relatively large tax increases would allow NHS funding to grow at historic levels. 1p extra on income tax raises around £4 billion a year. Without unprecedented productivity gains, there is likely to be a rapid growth in the gap between the demand for care and the ability to provide high-quality services. Although the NHS is delivering headline savings its not clear that it is making the necessary progress on service productivity and models of care. The scale of workforce cost growth after 2015 will be crucial.