IFS warns of ‘decade of austerity’ for NHS

More services may be charged for

The NHS budget squeeze could last for at least a decade, the Institute for Fiscal Studies (IFS) is warning.

In a report published today, NHS and social care funding: the outlook to 2021–22, the IFS says that funding will be tight for the public health service at least until 2020, and that only a long-term freeze in other public service budgets or large tax rises could enable a return to the 4% annual budget growth the NHS has become used to.

The report, funded by the Nuffield Trust, suggests the NHS should consider reviewing which services it offers for free.

Carl Emmerson, co-author of the report and deputy director of the IFS, said the spending plans that run to March 2015 – which require the NHS to make £20bn in efficiency savings – are the tightest faced by the NHS in 50 years.

He said: “Serious consideration should be given to the options for the NHS, which include reviewing the range of services available free at the point of use and reconsidering the level of taxation needed to finance them.”

The report estimates that meeting the tight plans for public spending penciled in for 2015–16 and 2016–17 would require real spending on public services to be cut by an average of 1.7% a year over these two years.

It adds that continuing the real freeze in NHS spending over 2015–16 and 2016–17 would mean cutting spending on other public services by an average of 2.3% a year.

Anita Charlesworth, chief economist at Nuffield Trust, said that if the government can increase taxation or borrowing, or generate greater efficiencies in other parts of the public sector, then the NHS might be in line for a real terms spend increase, albeit at a rate that fails to keep apace with the demands of an ageing population.

But she added: “However, if any of those options are judged to be too difficult politically or too damaging to vulnerable groups and other key public services, health spending will have to fall in real terms.

“Whatever happens, the NHS needs to plan a medium term future based on belt tightening and it needs to be prepared for future years to be even tougher than they are now.”

Mike Farrar, chief executive of the NHS Confederation, said the figures in today’s report support the NHS Confederation’s recent calls for the government to begin a “difficult yet necessary” dialogue with the public on why the health service needs to change frontline care.

He said: "We need to be honest about the action necessary to deal with a decade of spending squeezes and the rising cost of healthcare. We need to forensically examine what services and treatments provide the best outcomes for patients and local communities, and what the NHS can and cannot afford to provide in the future.”

Farrar added: "If the NHS does not change, it will not be fit for the future. We need swift action before the financial pressures overcome us."

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