Summary
On 30th October 2024, the UK government unveiled a new NHS budget, aimed at addressing funding shortfalls, infrastructure needs, and workforce issues. The budget includes a 3.8% annual increase in real terms, with £22.6 billionfor operational costs and £3.1 billion in capital for new equipment and facility upgrades. An additional £600 million is allocated to social care. Although these funds are intended to stabilize the NHS, health leaders caution they may fall short in tackling persistent challenges like the maintenance backlog and staffing shortages. The budget also emphasizes innovation and technology as potential solutions for sustainable NHS funding, though achieving this will require coordinated growth efforts across sectors.
Introduction
In recent years, the UK National Health Service (NHS) has faced a complex mix of challenges: rising healthcare demand, workforce shortages, aging facilities, and budget constraints. Each of these issues has put the NHS under intense pressure, leading to calls for reforms and increased funding to ensure that quality care remains accessible to all. The UK government’s new autumn 2024 budget (published on the 30th October) aims to address some of these long-standing issues with promises of increased funding, improved infrastructure, and greater investment in technology.
The 2024 budget represents a pivotal moment for the NHS, especially as it contends with the lingering effects of the COVID-19 pandemic, escalating maintenance needs, and financial pressures. This article examines the key features of the 2024 budget, compares it with the 2022/23 allocations, and explores the critical role of economic growth and innovation in the future funding of the NHS.
Overview of the 2024 Budget and Key Announcements
The 2024 budget introduces a 3.8% annual increase in health spending from 2023/24 to 2025/26, a boost that is hoped to stabilize NHS services and provide a foundation for modest improvements. This increase includes both day-to-day operational expenses and capital investments.
Key Allocations:
Day-to-Day Spending: A headline-grabbing £22.6 billion injection into the NHS’s operating budget over two years. This will cover essential expenses like staff salaries, medication, and operational costs, with NHS England’s budget alone expected to grow by 4.0% over the period.
Capital Investment: The capital budget is set to increase by 10.9% in real terms, reaching £13.6 billion by 2025/26. This funding is earmarked for improving the NHS’s infrastructure and facilities, with allocations for:
£1.5 billion for new surgical hubs and diagnostic scanners.
£1 billion to address critical maintenance needs in NHS buildings.
£2 billion for technology enhancements to boost productivity and cybersecurity, as well as a new fund to upgrade around 200 general practice (GP) surgeries.
Social Care Support: Recognizing the interconnected nature of health and social care, the government allocated an additional £600 million for social care over the next two years. This funding aims to support services for both adults and children, particularly as social care faces its own challenges with rising costs and workforce constraints.
Life Sciences and Preventive Health Initiatives: A £70 million Life Sciences Innovative Manufacturing Fundto drive advances in life sciences manufacturing and a £460 million fund for pandemic preparedness.
These budget allocations underscore the government’s intention to not only meet immediate NHS needs but to also invest in long-term resilience. However, health service leaders argue that while the headline figures appear promising, the 2024 budget may struggle to deliver significant changes in the short term.
The NHS’s Pressing Challenges and Budget Constraints
Although the 2024 budget is intended to reinforce the NHS, many experts warn that it falls short of what’s needed to tackle some of the health service’s largest problems.
Workforce Shortages
One of the NHS’s ongoing issues is a workforce stretched to its limits. Despite the budget increase, much of the planned improvements, such as reducing waiting lists and expanding diagnostic services, will fall on an under-resourced and exhausted workforce. Increased National Living Wage and National Insurance contributions are likely to compound these challenges, especially for GP practices and social care providers that operate on tight budgets. The NHS Long Term Workforce Plan indicated a need for even larger budget increases—estimated at 3.6% per year—just to address growing workforce needs and demands.
Aging Infrastructure and Maintenance Backlog
Aging NHS infrastructure presents another hurdle. Years of underfunding have created a maintenance backlog of £11.6 billion as of 2022/23. This backlog includes high-risk repairs that are critical to maintaining safe, operational healthcare facilities. The government has allocated £1 billion toward this backlog, but NHS leaders argue that far more is needed to address urgent maintenance needs and modernize facilities.
Source: House of Commons Library, Research Briefings: NHS funding and expenditure, 30 July 2024.
Financial Constraints and Rising Costs
As with any government budget, funding is finite. Many NHS trusts have faced unexpected cost increases due to inflation, rising wages, and supply chain disruptions. Even the sizable 2024 budget boost may not be enough to overcome these financial pressures. For instance, the £1 billion fund for backlog maintenance falls far short of NHS England’s own estimate, which suggests that £13 billion is necessary to fully address existing repair and maintenance needs. In this context, health leaders are cautious about whether the allocated funds will lead to visible improvements in the NHS’s performance and service quality.
A Comparative Look at the 2022/23 Budget
To understand the scope of the 2024 budget, it’s helpful to compare it with the 2022/23 allocations, which were shaped by pandemic-related expenses and subsequent budget adjustments.
NHS Spending and GDP Context
In 2022/23, NHS spending peaked at £212 billion, partly due to COVID-19-related costs. This level of expenditure was 10.4% of GDP, a significant figure reflecting the extraordinary circumstances of the pandemic. However, as COVID-related spending wound down, a notable 8.3% decrease in real-terms NHS spending was observed, reflecting a normalization after pandemic-driven increases.
Source: House of Commons Library, Research Briefings: NHS funding and expenditure, 30 July 2024.
Revenue Sources in 2022/23
The 2022/23 budget relied primarily on central UK taxation, supplemented by smaller streams like prescription charges (£670 million) and dental fees (£807 million). Other income sources included charges for overseas visitors, parking fees, and income from treating private patients. While these funds offer modest additional revenue, they pale compared to the NHS’s overall financial needs.
Source: House of Commons Library, Research Briefings: NHS funding and expenditure, 30 July 2024.
2022/23 Budget Implications
Despite these resources, the NHS faced a shortfall that left many needs unmet. For example, the maintenance backlog continued to grow, and the funds required to address workforce shortages and upgrade facilities were still insufficient. This shortfall set the stage for the 2024 budget, which aims to prevent the NHS from falling further behind.
Moving Beyond Traditional Funding: The Role of Innovation and Economic Growth
The pressing question remains: How can the NHS achieve long-term financial stability without continuously increasing the burden on taxpayers or national debt? A potential solution lies in fostering economic growth through innovation and technology, particularly within the healthcare sector.
Innovation and Economic Growth as Funding Strategies
Investing in health technology can drive efficiency and cost savings across the NHS, from AI-driven diagnostics to automation in administrative processes. Additionally, promoting health tech innovation offers economic benefits such as creating high-skilled jobs and attracting international investment. However, the UK and Europe face a significant gap compared to global competitors like the US and China, which have made strides in digital healthcare and medical technology.
The 2024 budget’s allocation of £70 million for the Life Sciences Innovative Manufacturing Fund marks a step toward addressing this gap. This investment could foster the development of new revenue streams through intellectual property, improved healthcare delivery, and more efficient operations.
Challenges to Achieving Growth
Despite the opportunities for innovation, Europe’s sluggish economic growth poses a significant challenge. A recent report from the EU Commission, led by Mario Draghi, highlights how European nations, including the UK, are lagging behind the United States and China in areas like technological advancement and economic growth. This gap has contributed to stagnant wages and low productivity, which ultimately limit the funding options available for a highly demanding NHS. Closing this gap will require a coordinated effort across government, industry, and academia to foster a vibrant ecosystem—especially within healthcare technology—that can drive economic progress and support sustainable NHS funding.
Conclusion
The 2024 NHS budget marks a critical juncture in the ongoing effort to sustain and improve the UK’s healthcare system. While the increased funding provides a temporary boost, it is unlikely to fully address the NHS’s deep-rooted challenges in workforce, infrastructure, and financial sustainability. For long-term stability, the NHS must look beyond traditional funding models and embrace a forward-looking strategy focused on innovation and economic growth.
Economic growth, however, remains a significant challenge, with Europe’s healthcare innovation lagging behind global leaders. As the NHS prepares to unveil its 10-year plan in 2025, it will need to strike a delicate balance between meeting immediate healthcare demands and investing in future technologies. By fostering a culture of innovation, the NHS can lay the groundwork for a sustainable, efficient healthcare system—one that can serve future generations without overburdening taxpayers or relying on increasing public debt.
Dr Joan Madia
Joan Madia is a Research Fellow in Health Economics and Policy Evaluation at the Center for Health Economics Services and Organisation (CHSEO) and the Health Economics group in the Nuffield Department of Primary Health Care Sciences (NDPHCS), Medical Sciences Division, University of Oxford. His research interests focus on health, wellbeing, human capital development, the evaluation of public policies, cost-effectiveness, and causal inference.