A response from the New Health Foundation to the Treasury’s Spending Review points to a £13 billion funding gap if productivity is not maintained. 

A response by non-profit New Health Foundation to the Treasury’s Spending Review, highlights the potential for a significant shortfall in NHS funding unless unprecedented productivity growth can be achieved.

The government, it points out, has allocated £183 billion for the NHS in England in 2025/26, with the Spending Review due to allocate funding up to 2028/29. 

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 £198 billion in 2028/29.

If productivity growth, however, is only 1% over this period which is in line with the long run average, NHS funding would need to rise to £211 billion by 2028/29. 

In short, it says, lower productivity growth would add £13 billion to the cost of the NHS in 2028/29.

“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,” said Anita Charlesworth, senior economic advisor and co-chair of the Health Foundation’s NHS productivity commission. 

Capital investment

The New Health 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 £14 billion 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.

The New Health Foundation did point out that recent changes to treasury fiscal rules to provide greater financial certainty for government departments, alongside new five-year capital budgets, are what it calls “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 report says. 

Membership body the NHS Confederation broadly agreed with the New Health Foundation’s analysis. 

“This new analysis is yet more evidence of how important it is for the NHS to increase productivity,” said chief executive Matthew Taylor.