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Theresa May is under  pressure to respond to public concerns over the health service.
Theresa May is under pressure to respond to public concerns over the health service. Photograph: Hannah McKay/PA
Theresa May is under pressure to respond to public concerns over the health service. Photograph: Hannah McKay/PA

Theresa May faces dilemma over NHS cash boost, says IFS

This article is more than 5 years old

PM will have to either raise taxes, slash public spending or break her own spending rules

Theresa May’s plans to mark the 70th anniversary of the founding of the NHS with a big cash boost will force the government to raise taxes, break its own budget rules or slash public spending elsewhere, according to the UK’s leading thinktank on the public finances.

Amid growing Westminster speculation that an NHS announcement would be made within the next month, the Institute for Fiscal Studies said the size of the health service meant that any meaningful increase in funding would create problems for Philip Hammond.

The chancellor, who has been having discussions with the health secretary Jeremy Hunt about how to fund an increase in NHS spending, is committed to balancing the government’s books by the middle of the next decade.

The IFS said that plan already involved £5bn of inflation-adjusted cuts to day-to-day spending together with the continuation of reductions in working age social security benefits.

But May has been under pressure to respond to public concerns about the NHS and told MPs in March she wanted a long-term plan for health spending to be announced before next year’s full Treasury spending review.

“Ultimately, it is for the government to take decisions about spending priorities, and I would suggest that we cannot afford to wait until next Easter. I think in this, the 70th anniversary year of the NHS’s foundation, we need an answer on this,” May said.

Increasing NHS spending by 4% – the annual average real-terms rise between its creation in 1948 and 2010 – would increase government spending by £21bn. The IFS said if Hammond wanted to avoid additional borrowing that would mean other day-to-day departmental spending falling by £26bn – a 12.7% reduction – or an equivalent rise in taxes or cuts to benefit spending.

“The government is in a bind,” the IFS said. “It is extremely doubtful that large additional cuts to spending on other public services are either feasible politically or consistent with maintaining quality.

“So unless it is able and willing to implement tax rises or further cuts to the social security budget over the rest of this parliament it is hard to see how a significant injection of additional cash into the NHS would be consistent with the government’s stated fiscal objective.”

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With Britain still negotiating its departure from the EU, the IFS said there was an unusual degree of uncertainty over the future performance of the economy, which made forecasting the public finances difficult. “The Treasury may be even more reluctant than usual to commit to a significant increase in NHS spending over a number of years given this uncertainty.

“Whenever an announcement on health spending is made, the same dilemma will also play out when the overall spending ceiling for next year’s spending review is announced in the autumn. Either public services will face more years of substantial cuts, or taxes will rise, or social security benefits will be cut further, or yet another set of fiscal rules will, in effect, be abandoned.”

More on this story

More on this story

  • Number kept waiting too long for NHS treatment tops 500,000

  • Faith-based groups 'increasingly stepping in to plug gaps in NHS'

  • NHS deficit last year twice as high as expected, say sources

  • MPs turn up heat on ministers over ‘shameful’ health funding

  • NHS needs £2,000 in tax from every household to stay afloat – report

  • Health services overloaded despite support pledges, claims report

  • Hammond and Hunt in battle over NHS funding boost

  • Record number of NHS operations cancelled at last minute

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