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.

peopleFrankie Boyle responds to referendum result in characteristically offensive style
Life and Style
Couples have been having sex less in 2014, according to a new survey
New Articles
i100... with this review
Have you tried new the Independent Digital Edition apps?
ebooksAn unforgettable anthology of contemporary reportage
Holly's review of Peterborough's Pizza Express quickly went viral on social media
footballTim Sherwood: This might be th match to wake up Manchester City
Arts and Entertainment
musicHow female vocalists are now writing their own hits
New Articles
Arts and Entertainment
musicBiographer Hunter Davies has collected nearly a hundred original manuscripts
Blahnik says: 'I think I understand the English more than they do themselves'
Arts and Entertainment
Michelle Dockery as Lady Mary Crawley in Downton Abbey
TVInside Downton Abbey series 5
Life and Style
The term 'normcore' was given the oxygen of publicity by New York magazine during the autumn/winter shows in Paris in February
fashionWhen is a trend a non-trend? When it's Normcore, since you ask
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

Marketing Manager - Leicestershire - £35,000

£30000 - £35000 per annum: Ashdown Group: Marketing Manager (CIM, B2B, MS Offi...

Marketing Executive (B2B and B2C) - Rugby, Warwickshire

£22000 - £25000 per annum: Ashdown Group: A highly successful organisation wit...

SEN Coordinator + Teacher (SENCO)

£1 per day: Randstad Education Leeds: Job Purpose To work closely with the he...

Research Manager - Quantitative/Qualitative

£32000 - £42000 Per Annum: Clearwater People Solutions Ltd: Our client is curr...

Day In a Page

Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam