IFS warns of 'unprecedented squeeze' on NHS

The Institute for Fiscal Studies warns against "false sense that all is now well"

Government spending on health care is facing an “unprecedented squeeze” over the next Parliament despite the NHS ring-fence, the respected Institute for Fiscal Studies warned today.

The think tank said that even if spending on health continues to keep pace with inflation, real per capita age-adjusted spending per person will be 9 per cent lower in 2018-19 than it was when the Coalition came to power in 2010.

Four years ago the Coalition threw a protective cloak around spending on the NHS and the global aid budget, ensuring they would not face real terms cuts, while other departments endured their deepest budget reductions on record.

The IFS said that the sharp projected shortfall in spending per person on health, despite the ring-fence, was a consequence of the growing pressures of the ageing population, with the average 80-year-old requiring seven times more health spending than the average 30-year-old.

To keep pace with the ageing of the population, spending needs to grow by 1.2 per cent a year in real terms, it said. And to rise in line with growth in the wider economy, spending needs to increase by 2.4 per cent a year.

The IFS pointed out that the NHS, experienced average annual real spending growth of 6.3 per cent between 1998 and 2008. The think tank added that the likely short-fall in health spending per person was an area of “particular concern” in the context of the Coalition’s wider programme of spending cuts over the next five years.

Departmental budgets have only been set by the Coalition up to 2015-16, the first year of the next parliament, but George Osborne has laid out plans to run a current budget surplus by 2018-19, which will entail three further years of severe fiscal consolidation.

The Chancellor has said that if the Conservatives win the next election he will seek to limit the squeeze on departmental spending by cutting 12bn from the welfare budget.

But the IFS warned that even if Mr Osborne achieved these welfare cuts, some Whitehall departments would be facing budget cuts of more than 30 per cent on 2010 levels.

And thanks to various spending commitments made by the Chancellor in last year’s autumn statement, such as increasing spending on childcare and university access, departments could face even bigger reductions to meet his budget surplus target.  “The question is whether that level of spending will be acceptable to voters” said Rowena Crawford of the IFS.

However, a separate analysis by the Oxford Economics consultancy on behalf of the IFS yesterday, suggested that the large spending cuts pencilled in by the Chancellor might not be necessary, even to meet his own deficit goals.

Oxford Economics estimates that the amount of slack in the economy is currently more than twice as big as the estimate of the Government’s official forecaster, the Office for Budget Responsibility (OBR).

This implies that the deficit will naturally fall quickly as the economy grows rapidly over the coming years. If this optimistic view is correct, much of the austerity presently planned by Mr Osborne for the next Parliament to clear the deficit would be unnecessary, said the IFS.

Oxford Economics estimates that the so-called “output gap” of the British economy is 5 per cent of GDP. The OBR judges the degree of slack to be just 1.8 per cent of national output.

 Andrew Goodwin of Oxford Economics also said that the Chancellor’s controversial spending cuts and tax rises since 2010 had depressed the economy more than initially expected, contrary to the view of the OBR which said that the weak economy until last year was a consequence of high inflation and the turmoil in the eurozone.

In an analysis of the tax proposals of the Coalition and the Labour Party, the IFS said neither further hikes in the income tax personal allowance nor the re-introduction of a new 10p starting rate of tax would do much to help lower-income workers, with the benefit mainly flowing to wealthier people. “It is hard to find a coherent economic rationale for it” said the IFS.

Kenny Ireland, pictured in 2010.
peopleActor, from House of Cards and Benidorm, was 68
A scene from the video shows students mock rioting
newsSchool leaver's pic YouTube video features staging of a playground gun massacre
View from the Llanberis Track to the mountain lake Llyn
Du’r Arddu
environmentA large chunk of Mount Snowdon, in north Wales, is up for sale
Have you tried new the Independent Digital Edition apps?
ebookA unique anthology of reporting and analysis of a crucial period of history
A family sit and enjoy a quiet train journey
voicesForcing us to overhear dull phone conversations is an offensive act, says Simon Kelner
Arts and Entertainment
The cast of The Big Bang Theory in a still from the show
tvBig Bang Theory filming delayed by contract dispute over actors' pay
England celebrate a wicket for Moeen Ali
sportMoeen Ali stars with five wickets as Cook's men level India series
Morrissey pictured in 2013
Life and Style
The director of Wall-E Andrew Stanton with Angus MacLane's Lego model
gadgetsDesign made in Pixar animator’s spare time could get retail release
peopleGuitarist, who played with Aerosmith, Lou Reed and Alice Cooper among others, was 71
Robyn Lawley
i100  ... he was into holy war way before it was on trend
Arts and Entertainment
High-flyer: Chris Pratt in 'Guardians of the Galaxy'
filmThe film is surprisingly witty, but could do with taking itself more seriously, says Geoffrey Macnab
Life and Style
food + drinkVegetarians enjoy food as much as anyone else, writes Susan Elkin
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

VB.Net Developer - £40k - Surrey - WANTED ASAP

£35000 - £40000 per annum + competitive: Progressive Recruitment: .Mid Level V...

Digitakl Business Analyst, Slough

£40000 - £45000 per annum + Competitive Benefits: Progressive Recruitment: Dig...

Mechanical Estimator: Nuclear Energy - Sellafield

£40000 - £50000 per annum + Car, Medical, Fuel + More!: Progressive Recruitmen...

Dynamics NAV Techno-Functional Consultant

£50000 - £60000 per annum + benefits: Progressive Recruitment: An absolutely o...

Day In a Page

Save the tiger: Tiger, tiger burning less brightly as numbers plummet

Tiger, tiger burning less brightly

When William Blake wrote his famous poem there were probably more than 100,000 tigers in the wild. These days they probably number around 3,200
A tale of two presidents: George W Bush downs his paintbrush to pen father’s life story

A tale of two presidents

George W Bush downs his paintbrush to pen father’s life story
Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

The day America’s love of backyard tigers led to a horrific bloodbath

With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

How Samuel Beckett became a French Resistance spy

As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
We will remember them: relatives still honour those who fought in the Great War

We will remember them

Relatives still honour those who fought in the Great War
Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

Kodak's last-ditch bid to keep celluloid alive

Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

Acting in video games gets a makeover

David Crookes meets two of the genre's most popular voices
Could our smartphones soon be diagnosing diseases via Health Kit and Google Fit?

Could smartphones soon be diagnosing diseases?

Health Kit and Google Fit have been described as "the beginning of a health revolution"
Ryanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?

Can we learn to love Ryanair again?

Four recent travellers give their verdicts on the carrier's improved customer service
Billionaire founder of Spanx launches range of jeans that offers

Spanx launches range of jeans

The jeans come in two styles, multiple cuts and three washes and will go on sale in the UK in October
10 best over-ear headphones

Aural pleasure: 10 best over-ear headphones

Listen to your favourite tracks with this selection, offering everything from lambskin earmuffs to stainless steel
Commonwealth Games 2014: David Millar ready to serve up gold for his beloved Scotland in the end

Commonwealth Games

David Millar ready to serve up gold for his beloved Scotland in the end
UCI Mountain Bike World Cup 2014: Downhill all the way to the top for the Atherton siblings

UCI Mountain Bike World Cup

Downhill all the way to the top for the Atherton siblings
Save the tiger: The animals bred for bones on China’s tiger farms

The animals bred for bones on China’s tiger farms

The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

A former custard factory, a Midlands bog and a Leeds cemetery

Introducing the top 50 hidden spots in Britain