Can the government afford the promised NHS funding boost?

A new fiscal report shows that the government’s claims of boosting NHS spending may be too optimistic

The Office for Budget Responsibility (OBR) has released a report which calls into question the government’s ability to boost NHS spending, despite recent funding promises.

Theresa May announced last month that healthcare spending will rise by 3.4% every year between 2019/20 and 2023/24; the additional money is set to be sourced from EU savings and tax rises, but the OBR’s fiscal sustainability report casts doubt upon the government’s ability to achieve this.

While the UK’s disconnection from the EU will see it making a saving of £13bn in 2022/23, £7.5bn – over half of it – will be deducted as part of the withdrawal agreement. The report states that public finances will be weakened for some time as a result.

‘Our projections suggest that the public finances are likely to come under significant pressure over the longer term, due to an ageing population and further upward pressure on health spending from factors such as technological advances and the rising prevalence of chronic health conditions,’ the report says.

‘Under our definition of unchanged policy, the government would end up having to spend more as a share of national income on age-related items such as pensions and (in particular) health care, but the same demographic trends would leave government revenues roughly stable.

‘As regards the “Brexit dividend”, our provisional analysis suggests that Brexit is more likely to weaken the public finances than strengthen them over the medium term, thanks to its likely effect on the economy and tax revenues.

‘In principle this [remaining £6bn] could cover slightly less than 30% of the cost of the health package in that year, but this does not take into account other calls on these potential savings, including commitments the government has already made on farm support, structural funds, science and access to regulatory bodies.

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‘While it is not for us to recommend the size or timing of any additional fiscal tightening measures, policymakers and would-be policymakers should certainly think carefully about the long-term consequences of any policies they introduce or propose in the short term, including at next year’s Spending Review. And they should give thought too to the policy choices that will confront them once the current planned consolidation is complete.’

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