In January 2023, in the thick of another challenging winter, the government said the NHS had ‘all the resources it needs’ to cope with the pressures gripping healthcare services. Yet NHS capital spending and workforce investment have lagged behind other comparable countries.
What has led to this position and how could the NHS look if it did have all the resources it needs? Here, we explore four implications of failing to keep pace with EU-14 countries - and at what cost.
1. The NHS would have been more resilient to shocks
The UK spent less on health than its peers in Europe, as seen in figure 1 below. Between 2010 and 2019, average day-to-day spending in the UK was £3,005 per person, 18 per cent below the EU-14 average of £3,655. This is despite following similar trends in demographic change to comparable EU countries.
Analysis from the Health Foundation suggests that if UK spending per person had matched the average across the EU-14 countries between 2010-2019, UK total spending per year would have averaged £227 billion; £40 billion higher than actual average annual spending (£187 billion). Matching spending per head to France or Germany would have led to an additional £40 billion and £73 billion (21 per cent to 39 per cent increase respectively) of total health spending each year.
Levels of healthcare spending have a direct impact on available resources. This affects the healthcare system’s ability to respond to demand and pressures, as well as systemic challenges, such as an ageing population and growing healthcare needs.
2. The NHS would have been on the front foot to deal with pandemic backlogs
Healthcare capital investment refers to the spend on buildings, machinery, IT and equipment. In addition to day-to-day health spending, the UK has particularly lagged behind its peers.
Figure 2 shows how the UK compares with some EU-14 countries in relation to capital investment in healthcare. UK capital investment in healthcare as a share of GDP has been below the EU-14 average throughout the past decade.
But what does that look like in terms of actual money spent? Figure 3 below shows how much more capital spending there would have been in a scenario where the UK matches EU-14 peers. The smaller difference at the start of the 2010s grew significantly, peaking in 2013 where the UK would have needed an additional £4.1 billion capital investment to match the EU-14 average. Overall, across 2010-19, the UK would have invested a full £33 billion more in healthcare capital.
The effects of this are obvious from looking at the maintenance backlog (figure 4), outlining a deteriorating physical infrastructure. The total cost of tackling this backlog has risen substantially, with essential maintenance backlog at under £5 billion in 2015/16 but rising to £10.2 billion in 2021/22. Our recent article echoed the concerns of our members – how deterioration of NHS infrastructure as a result of continuous underinvestment in NHS capital hinders efforts of reducing waiting lists while also increasing risks for patients.
If the UK had matched the average investment in health capital of its peers (as a share of GDP), it would have increased its outputs (measured by hospital episodes) by 41 per cent across 2010-19. This is based on calculating how many episodes were completed against actual capital spend (excluding limitations on other factors required for delivery of this activity). The additional activity could have also helped address pressures on waiting lists and one positive consequence could have been a reduction in the backlog.
The chart above (figure 5) shows the potential impact on additional activity (output) was greatest in 2013/14, the year when the gap in capital investment between the UK and EU-14 countries had peaked (UK % of capital investment was lowest in 2013 in the past decade).
3. The NHS would have benefited from more doctors
The analysis that follows relies on an oversimplification of the relationship between additional workforce and output as the marginal analysis generally depends on various factors such as the rate of return of scale. However in this analysis, a constant return of scale was assumed where inputs in the NHS such as labour (doctors) or capital investment (machinery, IT, estates) increases at the same rate as outputs (such as episodes delivered in hospitals). Nonetheless, the analysis illustrates the potential size of the opportunity for the NHS in terms of delivering more healthcare in relation to its resources matching peer countries such as the EU-14.
There is more that dictates NHS output than just physical infrastructure. Data from the OECD below (figure 6) reveals that over the previous decade, the UK had fewer doctors as a proportion of the population than other EU countries.
It is true that frontline workforce numbers have risen considerably in recent years; the most recent NHS workforce statistics for England show that the number of Full Time Equivalent doctors as of November 2022 was 13.4 per cent higher compared to the same time three years ago, while professional qualified staff as a whole was up by 10.9 per cent over the same period.
Yet the analysis below (figures 7 and 8) shows that if the NHS had matched EU rates of doctors per 100,000, the number would have been a full 40 per cent higher in 2019, with 79,550 additional doctors. Recent improvements cannot be assessed independently of the long-term trend of lower staff numbers, particularly while vacancies are at a historic high (124,000 across the NHS workforce in England, 12.5 per cent higher than the same time a year earlier).
What does this translate to in terms of additional activity? Using actual hospital activity versus actual number of doctors, we generated per doctor hospital output measured by number of hospital episodes (figure 7). This is then compared against the potential number of activities (hospital episodes) when the UK matches the same rate of doctors as in EU-14 average (figure 8).
If the UK had matched the average rate of doctors (per 1,000 population) of its peers, it could have increased its outputs (measured by hospital episodes) by 29 per cent across 2010-19. This is based on calculating how many episodes were completed against the actual number of doctors.
The NHS would have benefited from more nurses
A similar analysis was undertaken for practicing nurses. The chart below (figure 9) reveals that over the previous decade, the UK had fewer nurses as a proportion of the population than other EU-14 countries. In 2019, there were 8.2 nurses per 1,000 population in the UK whereas the EU-14 average was 8.7 per 1,000 population.
If the NHS had matched EU rates of nurses per 1,000 the number would have needed almost an additional of 490,000 nurses across 2010-19. In 2019 alone, the UK needed 33,398 additional nurses to match the EU-14 average.
Looking more closely at what this means in terms of additional potential activity (figure 10), if the UK had matched the average rate of nurses (per 1,000 population) of its peers, it could have increased its outputs (measured by hospital episodes) by 9.6 per cent across 2010-19. Again, this is based on calculating how many episodes were completed against the actual number of nurses.
Impact of wider budget cuts on the NHS
Direct spending on health as explored here has a clear impact on service provision and thereby health outcomes. However, this is not the only factor determining outcomes – ‘health’ is determined by a diverse range of social, economic and environmental factors. Variation in any one of these factors can influence health and subsequently have a knock-on effect on the demand and use of healthcare resources.
During the last decade, austerity measures saw significant and sustained cuts in budgets for other departments - local government, communities, and education in particular  - with adverse long-term effects on health and subsequently increases in healthcare demand. More recently, analysis conducted by the Institute of Fiscal Studies looked specifically at the impact of reductions in social care spending and found that recent trends led to substantial increase in A&E demand, particularly by the elderly segment of the population. The analysis quantified the impact of social care spending cuts to be one additional A&E attendance for every 15 attendances. We may continue to see this knock-on effect of spending cuts on NHS activities.
Years of underinvestment in capital and workforce challenges has led to another difficult winter – arguably the worst in a generation. Because of this lack of support, the NHS hasn’t been able to maintain the level of resources - both physical infrastructure and workforce – needed to be able to respond effectively to our increasing healthcare needs.
This article shows spending on the NHS lagging behind its peers in the EU-14 countries. One example shows the NHS needed £33 billion additional capital investment if it were to match the average peer country. Furthermore, it needed almost 390,000 doctors across 2010-2019 if it were to match its peers (on average). According to our analysis, this could have potentially translated to increases of 41 per cent and 29 per cent, respectively.
While the government plays catchup, our analysis shows how our healthcare system could look if we had funding comparable to that of EU-14 countries and provides another lens to review the most recent funding arrangements, broadly welcomed but too late to avert the recent crisis.