Big Picture - NHS Funding
Last Updated: July, 2019

The NHS is generally considered as one of the most efficient health care systems in the world. As privatisation has taken its toll, is has started to slide down the ranks, but a recent  Commonwealth Fund  report shows that the NHS still performs well. It should be noted though that the health of our society is also very dependent on socioeconomic factors (See  Prevention ) that complicate comparisons of health system performance.

Broadly speaking, funding for the NHS is being squeezed in two ways. One way is by explicit underfunding from the government, and the other way is by various mechanisms now embedded within the structure of our health services that divert a significant proportion of the money it does receive away from clinical care.


The NHS budget needs to keep pace with demand for services and inflation in the costs of providing those services. It has been suggested that this would require an annual budget increase of about 4 percent, But since 2010, the NHS has received annual rises in its budget of just over 1 percent.

Combined with the budget squeeze, the NHS has been mandated (starting with the  Nicholson Challenge  in 2010) to make £40-billion in  efficiency savings . These are two sides of the same coin, as the government is effectively saying 'we are going to give the NHS less money, therefore it must adapt to having less money'. The result is that the NHS is undergoing the biggest funding squeeze since it was created, despite the allocated budget being less than the EU average.

From the  Commonwealth Fund  Report - 2017

The graph shows that the UK has the lowest spending on health care as a percentage of GDP relative to the other countries listed. The USA - the country with the most privatised system of health care in the world - has by far the highest spending as a percentage of GDP despite having the highest GDP in the world (in 2018 the USA GDP was bigger than that of China and bigger than that of the European Union).

The graph shows that UK health care spending rose sharply in 2012 coinciding with the  2012 Health and Social Care Act .

Extra money for the NHS has always been given with "transformation" strings attached - image from South Tyneside and Sunderland CCGs "Working Together for Clinical Excellence"

In 2018 the government announced £20.5-billion in extra spending to 2024. This is equivalent to just 3 percent in real terms per year, while NHS England's own forecast is for activity to increase by 3.1 percent per year, so nothing is left over. The announcement coincided with the publication of the  NHS Long Term Plan . The extra money is not enough to adequately fund health and social care services, but it will help to fund NHS transformation - the reconfiguration of services into  Accountable Care Systems . This echoes the extra funding given to the NHS by the New Labour government from 2000 to 2008, which served to paper-over the cracks caused by implementing  NHS Plan 2000 . Just as with 'NHS Plan 2000', the extra funding to 2024, is not so much for front-line services as it is for structural transformation to facilitate  privatisation .

Diversion of Funds

No one knows how much money is being diverted out of clinical care and into the pockets of the private sector because the public expenditure data does not reveal it, and neither do NHS accounts. The public are constantly being told about all the money going into the NHS, but not about how their taxes are propping up and cosseting companies whose profitability and stock-market positions frequently depend entirely on their intimate relationships with the NHS.

Some ways in which the NHS budget is being diverted to the private sector include:

The NHS budget is gradually becoming more of a funding stream for private for-profit companies masquerading under the NHS logo.

Magic Money Tree

You may have heard from Theresa May and other proponents of austerity and privatisation that there is No magic money tree, suggesting that it is simply impossible to fund public services. We frequently hear the national economy described as if it functioned like a domestic household budget, with a strictly limited ability to 'afford' goods and services. In reality the economy does not work anything like that, there is effectively a magic money tree:

There is no direct connection between public expenditure and public income. There is no state piggy bank or house-keeping allowance.

What is spent into the economy is not dependent upon taxes. In other words, it is not the case that taxes are collected first, and the collected taxes are the sole source of spending for public services. Actually it is the other way around. Money is spent into the economy, regardless of taxes, then taxes are collected to recycle money and balance the economy.

New money is created when banks create loans or the government sets a budget. One is a private form of money creation and the other is public. Our government prefers NOT to use its power to limit privately created money. It prefers NOT to use its power to spend publicly created money into the economy creating jobs that deliver essential public services. Consequently most of the money supply is directed into private enterprise and not into public services. It amounts to a straightforward ideological choice between a publicly controlled economy that could be orientated towards providing for everyone's needs, or a privately controlled economy this is orientated towards the accumulation of wealth for a few people.

You could say that the economy is what we all do, our combined daily activities are the economy! But the government (aligned with powerful corporations) use their power to direct our activities away from publicly provided services. This makes way for privatisation, and keeps most of us dependent upon unelected profit-maximising private corporations for our income and essential services. Professor Mary Mellor of Northumbria University says:

When we are told social welfare, education, housing, health cannot be afforded because there is no magic money tree, this is a lie. New money is constantly pouring into the hands of the already rich. ...[Magic Money Trees] do exist - what matters is who owns and controls them.
Magic Money Tree
No Money to Fund the NHS?

The UK campaign group PositiveMoney has done tremendous work towards raising people's awareness of how our economic and monetary system actually work. It is arguable that more than anything else, it is people's fundamental misconception of the really-existing economic and monetary system that enables governments and corporations to mislead people.