New Health Foundation analysis highlights the potential for a significant shortfall in NHS funding unless unprecedented productivity growth can be achieved.
The analysis, part of the Health Foundation’s response to the Treasury’s Spending Review, estimates the funding requirements for the NHS through to 2028/29 to meet the needs of a growing and ageing population with increasing major illness.
The government has allocated £183 billion for the NHS in England in 2025/26, with the Spending Review due to allocate funding up to 2028/29. The Health Foundation analysis projects funding needs under two productivity scenarios:
- If the NHS achieves 2% productivity growth from 2021/22 to 2028/29 (in line with the government’s target for improving productivity), the NHS revenue budget would need to rise to £198bn in 2028/29.
- However, if productivity growth is only 1% over this period (in line with the long run average), NHS funding would need to rise to £211bn by 2028/29
Lower productivity growth would add £13bn to the cost of the NHS in 2028/29.
The pandemic dealt a major shock to NHS productivity, which was 24% lower in 2020/21 compared to 2018/19. This has increased the costs of meeting rising care needs. The latest estimates from the Office for National Statistics (ONS) and NHS England suggest that productivity is still below pre-pandemic levels. While NHS England has recently reported productivity improvements in the hospital sector, sustained productivity improvements across the health service at or above 2% have not been achieved in recent times.
The Spending Review is a key moment for the government to ensure the right measures are in place to boost productivity. This includes ensuring any new funding is invested in the right places – including capital investment in buildings, equipment, technology and IT, as well as strengthening primary care and community-based services. Policy changes are also needed to strengthen the NHS’s capacity to innovate and improve, including support for staff to develop new ways of delivering services and a focus on data and management capabilities.
The Health Foundation has recently launched a new NHS Productivity Commission to explore solutions to the productivity challenge. Over the next 18 months, it will look at productivity across hospital, primary, community and mental health care settings, and develop recommendations on national policy changes to help drive long-term productivity growth.
The Foundation’s response to the Spending Review also reiterates the importance of capital investment. To match the capital investment levels of comparable countries and compensate for a decade of low investment, it estimates capital spending would need to grow by 10.2% annually between 2024/25 and 2029/30. Fixing the £14bn maintenance backlog is a key priority, and significant capital investment in technology will be needed if the NHS is to deliver the shift from ‘analogue to digital’ called for by ministers.
Recent changes to Treasury fiscal rules to provide greater financial certainty for government departments, alongside new five-year capital budgets, are encouraging signs of a commitment to long term investment. The real test will be how far the government matches those ambitions with increased investment in the Spending Review.
The Foundation’s submission also highlights the need to take a long-term perspective to improve the nation’s health and support sustainable economic growth, calling for action to:
- Build on the welcome recent investment in the public health grant by restoring the grant to the real-terms equivalent of 2015/16 per person levels
- Allocate an additional £7.6bn for adult social care to meet rising demand and expand access to publicly-funded support.
- Commit to undertaking the work needed to develop proposals to classify and protect spending on prevention by implementing a new category of public spending – Preventative Departmental Expenditure Limits or PDEL).
Anita Charlesworth, Senior Economic Advisor and co-chair of the Health Foundation’s NHS productivity commission, said:
“The government has set a huge task for the NHS to consistently deliver 2% annual productivity growth. Our new analysis underlines how important it is for the NHS to improve productivity and the potential funding shortfall that could emerge if it doesn’t. If the NHS is unable to meet the government’s target then this could create a significant fiscal headache for government who will be faced with either having to find the money from elsewhere or scale back what the NHS is able to deliver.
‘Capital spending on new buildings, equipment and technology in the Spending Review will be key to help boost productivity over the long term but reform to create the conditions for boosting productivity is just as vital. A key factor will be how quickly investment can be translated into service improvements.
‘Much is now riding on the forthcoming 10-Year Health Plan. The government’s ambitions to reduce waiting times, boost community-based services, increase the use of digital technology, and prevent ill-health are the right ones. But achieving these ambitions will require significant investment in the NHS in the forthcoming Spending Review, accompanied by a relentless focus on boosting productivity.’
