Latest projections show how productivity and prevention reform can bend the curve of NHS finances

New joint analysis between the Institute for Public Policy Research (IPPR) and LCP Health Analytics quantifies the effect of improved productivity and prevention on the projected cost of government-funded healthcare to 2034/35.

Our projections build on previous analysis conducted in 2023 and leverage latest available financial, demographic and healthcare data to inform IPPR's latest report on NHS reform, which was recently published.

Scenarios for the future

The following scenarios are explored:

• Improved productivity: Productivity in public sector healthcare provision grows by 2% per year, as envisioned by the NHS productivity target.

• Improved prevention: Each region halves the gap between its current healthy life expectancy (HLE) and the region with the highest current HLE (the South East, with 64 years) by 2034/35, while the region with the highest HLE remains at its current level. This is consistent with the Government's health mission.

A “combined prevention & productivity” scenario models the effect of both improvements occurring together. We also explored more ambitious variants of the “improved prevention” scenario, involving peak regional HLE returning to pre-pandemic levels (2 years above current levels) or a repeat of the rapid HLE gains of the 2000s over the coming decade.

We compared all scenarios against a baseline scenario where HLE is assumed to remain flat and productivity is assumed to grow at 0.5% per year, both broadly in line with pre-pandemic trends. Key results for each scenario are shown in Tables 1 and 2, with further results and scenario descriptions available in our full report.

Bending the curve

If recent trends are continued, government-funded healthcare spending is expected to grow steadily to over 9.5% of GDP in 2034/35. However, as shown in Figure 1, improvements in productivity and prevention could almost completely flatten this growth, with spending as a percentage of GDP remaining at just over 8% in a decade’s time.

If delivered, these improvements are expected to provide annual savings of over £50bn in 2034/35, comparable to the current UK defence budget, with most of the gains arising from increases in productivity (see Table 1). Still greater savings could be achieved under the more ambitious prevention scenarios (see Table 2).

Figure 1. Projected government healthcare spending as a share of GDP 

Table 1. Prevention and productivity scenarios

Table 2. Alternative prevention scenarios

Methodology

In this analysis, annual costs are projected from a 2023/24 baseline of Department of Health and Social Care (DHSC) net expenditure from operating activities. The projections allow for expected future changes in healthcare utilisation rates, unit costs and population demographics, leveraging data from various sources including the ONS, OBR and NHS England. Further detail and a full list of sources is available in our full report.

The principles of this latest analysis are consistent with our previous healthcare funding projections published in September 2023. The most significant movement in underlying data since then is a reduction in total DHSC expenditure, largely driven by a reduction in temporary costs related to the pandemic response, such as surveillance and detection programmes.