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NHS: Causes of Financial Strain and Budget Shortfall

Of the officially required £8.5 billion increase in NHS spending over the next 3 years £7.2 billion is due to population growth and £3 billion due to an ageing population - (the predicted budget is short).

The NHS faces a budget shortfall of £8.5 billion over the next 3 years (until 2015), this amounts to £2.8 billion a year (in real terms).  What is costing £2.8 billion a year?

The total budget for the NHS in 2010-11 was £107 billion (NHS Funding and Expenditure

NHS Budget 2010-2011

Population growth is one obvious source of growth in demand, the Predicted population of Britain will grow by about 1% per annum which, on an NHS budget of £100 billion will cost £1 billion per annum.  This population growth is largely due to migration and first generation children.

Old age is a source of stress in the NHS budget, according to the ONS article, Population Trends - Ageing and Mortality in the UK - National Statistician's annual article on the population (Pdf 712Kb):

"Over the last 25 years the number of people aged 65 and over in the UK
has increased by 16 per cent, from 8.5 million to 9.8 million. "

So the stress on the system due to old age had risen by 1.3 million people in 25 years or 52000 a year.   This stress also includes an escalating cost of therapies and treatments.  Old people cost more to treat than younger people ( in New Zealand it’s estimated that the average person aged 65 or over costs five times as much to care for than people aged under 65). This means that the 52000 increase is equivalent to a general increase of population of about 250,000 per annum or 0.5% of the English population so will result in £0.5 billion extra spending per annum.

Migration accounts for at least 28% of the maternity and paediatric budget for the NHS in England.

According to the ONS Country of Birth of Foreign Born Mothers 2010:

• A quarter of births (25.1%) in 2010 were to mothers born outside the UK
• The total fertility rates have risen to 1.88 for UK born women and 2.45 for non-UK born women
• Poland became the most common country of origin for non-UK born mothers
• Pakistan remains the most common country of origin for non-UK born fathers
• Newham was the local authority with the highest proportion of births to non-UK born women  (76.4%)

In England this works out at about 28-29% of all births. This is up from around 17% in 2000.  The total number of children born each year is about 700,000 so the extra stress on the maternity system due to migration is is around 200,000 per annum. The maternity and neonate budget and other first year costs is about £6 billion per annum so the children of immigrants cost about £0.2 billion per annum extra.

Increases in drug prices are not responsible for added stress to the NHS, inflation in drug prices being similar to or less than the RPI:

Source: ABPI http://www.abpi.org.uk/industry-info/knowledge-hub/uk-economy/Pages/uk-industry-market.aspx

We can stop the analysis here.  Every year the NHS budget requirement increases by £1.2 billion due to migration and £0.5 billion due to an ageing population. These are cumulative increases so in year 1 there is £1.7 billion needed, year 2 £3.4 billion needed and in year 3 £5.1 billion needed.  This amounts to a total of £10.2 billion over 3 years.  The government had better watch out because their costings of £8-9 billion scarcely cover even the migration driven rise in costs.

As usual the government is hiding the true cause of over half the shortfall in the NHS budget, the BBC quoted a government report as saying: "The cost of new treatments and the ageing population are two of the factors causing the inflation in the health service, the report says."  No mention at all of migration.  The population growth is deliberate government policy - see the Predicted population of Britain.

See also

The management of the NHS

Patient Care in the South West of England

(First published 17/9/12)

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