Introduction

Public spending on health has increased substantially over the past 75 years. In 1949– 1950, the first financial year after the founding of the National Health Service (NHS), UK public spending on health was £16 billion (2022–2023 prices; HM Treasury, 2022b). This was 3.5 per cent of national income and accounted for 9.2 per cent of total public spending. By 2019–2020, just before the COVID-19 pandemic, publicly funded health spending had increased more than tenfold to almost £180 billion (2022–2023 prices), accounting for 18.6 per cent of overall public spending, 7.3 per cent of GDP.

Throughout the last 75 years, funding for the NHS has risen by more than inflation and by more than GDP, and, on average, healthcare spending has increased by 3.6 per cent in real terms (Figure 3.1). Reductions in real spending have been rare. Spending fell in the early 1950s as budgets fluctuated sharply in the early years of the NHS and prescription charges were introduced. In the late 1970s health spending fell as part of widespread cuts to public spending under the terms of a loan from the International Monetary Fund.

As the NHS marks its 75th anniversary, health service funding is under pressure and the outlook is hugely challenging. The health service has experienced comparatively low funding growth for more than a decade, and now faces the pandemic’s legacy of major backlogs, questions over the service’s resilience to future health shocks and the pressures of an ageing population with rising multi-morbidity and inequality.

The pressures on NHS funding are not happening in isolation: Office for Budget Responsibility and OECD forecasts for the UK economy and public finances for 2023 are bleak (Office for Budget Responsibility, 2022b). The performance of the economy is very important for healthcare. In 2019 before the pandemic health spending as a share of GDP was broadly in line with that of the 14 major European countries (9.9 per cent compared to the EU14 average of 9.8 per cent). But when we look at spending per head over the decade 2010 to 2019, UK spending was almost a fifth lower than the EU14.