Healthcare to place growing burden on public finances

17 Jul 18

Health spending will put public finances under “significant pressure” over the next 50 years, the Office for Budget Responsibility has warned.

The OBR’s Fiscal Sustainability Report published today predicts that health spending will rise from an estimated 7.1% of GDP in 2017–18 to 13.8% by 2067–68.

However, the independent watchdog forecasted that spending on adult social care over the same period will only increase from 1.2% to 1.9% of GDP.

In its report, the OBR looked beyond the medium-term forecast of its twice-yearly Economic Fiscal Outlook report to assess the longer-term impact of government activity.

It said that the long-term outlook for public finances is “less favourable” than at the time of the last FSR in January 2017.

The report noted that Theresa May’s NHS spending pledge of £20bn annually until 2023–24 is “as yet unfunded”, highlighting a need for higher taxes.

But the OBR did not project that increased health spending would be supported by higher taxation, noting instead that this would mean increased borrowing – putting public sector net debt “on an unsustainable upward trajectory”.

“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,” the report said.

The watchdog also disregarded May’s initial assertion that increased NHS spending would, in part, be funded by a “Brexit dividend”.

It said: “The government has indicated that it will fund at least some of the health package by increasing taxes and/or reducing other spending, but in the absence of firm detail we cannot include this in our projections.

“It also said that the announcement will be funded in part by a ‘Brexit dividend’, although our provisional analysis suggest Brexit is more likely to weaken than strengthen the public finances overall.”

The report added that “pending a detailed [Brexit] withdrawal agreement and associated spending decisions, we assume in this report that the extra health spending adds to total spending and borrowing rather than being absorbed in whole or part elsewhere.”

Speaking at an Institute for Government event on Monday, Anita Charlesworth, director of research and economics at the Health Foundation, said that spending control in the NHS is “a fiction”.

The Treasury has been contacted for comment.

Did you enjoy this article?