ICAEW chart of the week – Public spending health squeeze

A recent report by the Institute for Fiscal Studies and The Health Foundation concludes that annual real-terms increases of 4% in the funding for UK health and social care is needed, mainly to care for the growing number of older people.

Our chart this week shows that consequently, spending on health and social care is forecast to increase from 22% of the total to 28% over the next 15 years.  With the share taken by pensions and debt interest also expected to increase and ring-fences surrounding defence, international development and education, this means that either taxes must rise or spending on ‘everything else’ has to reduce significantly – from 40% to 30% over the same period.

Will it really be possible to deliver further substantial cuts in working-age benefits or in spending on police, prisons, the courts, transport and the environment? Not to mention to everything else? Can our creaking infrastructure really survive another 15 years of underinvestment?

Given the pressures on this and future governments, we suspect that it is more likely that any increase will have to be funded by higher taxes and greater borrowing. Unless we can come up with some radical alternatives: suggestions on a postcard to the Chancellor!

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