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John Appleby on the impact of the economic downturn on health care

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John Appleby, Chief Ecomonist at The King's Fund, discusses the impact of the economic downturn on health care, as part of The King's Fund Annual Conference.

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John Appleby on the impact of the economic downturn on health care

  1. 1. Implications of a recession for the NHS: A freeze…or worse? Prof John Appleby Chief Economist
  2. 2. • Lehman Brothers – Failed • Bear Stearns – Taken over • RBS – Bailed out • Lloyds TSB – Bailed out • Citibank – Bailed out • AIG – Bailed out • Fannie Mae – Bailed out • Freddie Mac – Bailed out • Bank of America – Bailed out • Northern Rock – Nationalised • Bradford & Bingley – Nationalised • HBOS – Taken over • Merrill Lynch – Taken over • Alliance & Leicester – Taken over
  3. 3. Bail outs and rescue packages…..
  4. 4. NIESR recession tracker
  5. 5. Public sector net debt projections (IFS)
  6. 6. ‘Fiscal tightening’ options and government net debt
  7. 7. “If the Treasury’s analysis in Budget 2009 is correct, the crux of the fiscal problem is that the amount the Government will need to borrow to bridge the gap between its spending and tax revenue once the economy has recovered is around 6.4% of national income (or £90 billion a year in today’s terms) larger than it thought in Budget 2008. Leaving this increase in the structural deficit unaddressed would see public sector net debt rise to unsustainable levels, even if borrowing costs stay low. The costs of the Government’s financial rescues, the temporary increase in borrowing during the recession, and the costs of the temporary fiscal stimulus package all push the peak level of debt higher, but they are of (at best) second-order importance in determining the broad trajectory of the debt burden.” Source: Britain’s fiscal squeeze: The choices ahead. IFS September 2009
  8. 8. NHS funding and previous recessions
  9. 9. Future NHS funding
  10. 10. 2.5% a year is 1.5 ppts below long run average No six year period in history of NHS No six year period with real reductions of zero growth in each year history of NHS
  11. 11. Funding the scenarios… • Impact on other spending departments • Consequences for taxation
  12. 12. And I just repeat to you that We are committed to real- our aim, our plans are to terms growth in the NHS. increase National Health George Osborne and David Service expenditure every Cameron have gone out on a year, not just on the basis limb. They have said we are of cash, but on the basis not going to cut the NHS. of real-term increases in the National Health Service
  13. 13. 1.5% for other departments, 3% for NHS = £17.1 billion tax rise. £540 per family, 4% on VAT
  14. 14. Filling the gap? • Tax increases/cuts in other departments? • A bigger bang per NHS buck….
  15. 15. Year/period Annual productivity gains required to close funding gap Average annual change (Per Total for period (Money, £millions, cent) 2010/11 prices) Arctic Cold Tepid Arctic Cold Tepid Fully Engaged 2011-2013 8.0 6.0 4.0 25,398 19,048 12,699 2014-2016 6.8 5.8 2.8 21,588 18,413 8,889 Whole period 7.4 5.9 3.4 46,986 37,462 21,588 Solid Progress 2011-2013 8.3 6.3 4.3 26,350 20,001 13,651 2014-2016 7.1 6.1 3.1 22,541 19,366 9,842 Whole period 7.7 6.2 3.7 48,891 39,367 23,493 Slow Uptake 2011-2013 8.2 6.2 4.2 26,033 19,683 13,334 2014-2016 6.8 5.8 2.8 21,429 18,255 8,730 Whole period 7.5 6.0 3.5 47,462 37,938 22,064
  16. 16. ‘How cold will it be? Prospects for NHS funding: 2011-2017’ King’s Fund/Institute for Fiscal Studies www.kingsfund.org.uk www.ifs.org.uk

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