Warning issued over £20 billion NHS funding gap
Britain faces a potential funding shortfall of £20 billion for the National Health Service (NHS) if productivity does not improve by 2028, according to a new report. Chancellor Rachel Reeves has been cautioned that to avert significant tax increases, productivity levels must return to pre-pandemic standards, reports BritPanorama.
The report indicates that in 2024, NHS productivity was already 8% below 2019 levels and 12.8% behind the progress expected had pre-COVID trends continued. The implications of this productivity gap are significant, as calculations from HMRC suggest that failing to address these issues could lead to a 5p rise in corporation tax or a 2p increase on both basic and higher rates of income tax.
Former Conservative Cabinet Minister John Redwood, who authored the report, refers to the situation as a “productivity crisis,” underscoring the long-term failure to enhance the economy’s productivity. Since the 2008 financial crisis, the average annual productivity increase has stagnated at just 0.4%, in contrast to the 2.1% average seen before that period.
Mr. Redwood emphasized the stagnation: “This century there has been no growth in government productivity despite big spending on computers and automation. The Chancellor’s black hole in the finances is all created by the failure to even deliver 1% a year improvement in productivity.” He advocates for improvements in efficiency, suggesting that effective use of technology and proper staffing could reduce public sector spending significantly.
He also highlighted that the productive capacities of sectors such as mining, manufacturing, energy, and water utilities have decreased from 21% of GDP in 1997 to just 13% in 2022. Additionally, criticism has been directed at ministers for not strategically exploiting North Sea oil and gas, both of which remain among the most productive sectors with high revenue potential.
A government spokesman addressed these concerns, stating: “Taxpayers’ money must be spent wisely. That’s why we are expecting all Government departments to deliver nearly £14 billion of efficiencies.” They noted that NHS productivity had indeed increased by 2.6% in the first half of the year, while the waiting list decreased by 312,000 since July 2024.
The report serves as a pressing reminder of the intertwined challenges of health service funding and national productivity, raising imperative questions regarding fiscal policy and public service reform.
While the focus on productivity may reveal underlying systemic issues, the adaptability of the workforce and effective resource management will be critical in shaping the future landscape of the NHS.
