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Paul Johnson: Health spending in context

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Paul Johnson, Director of the Institute for Fiscal Studies, gives an overview of how public spending is distributed and where health fits within the total spending picture.

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Paul Johnson: Health spending in context

  1. 1. Health spending in contextPaul JohnsonOctober 18 2011© Institute for Fiscal Studies
  2. 2. Continuing change in the shape of the state • Health, social protection and education account for two thirds of public spending • Up from less than half in 1979 • Increase results from health and social protection – Education has merely maintained its share • Defence, housing and support for business and industry have taken the strain© Institute for Fiscal Studies
  3. 3. Public spending in 2010-11 10% Social protection 1% 3% Personal social services 2% 29% Health Education 6% Transport Defence 5% Public order and safety Gross debt interest 6% 4% Housing 3% TIEEE AFF 13% 18% Other© Institute for Fiscal Studies
  4. 4. Public spending in 1978-79 Social security 9% 1% Personal social services 23% Health 9% Education Transport 6% 2% Defence Law, order & protection 10% Gross debt interest 10% Housing TIEEE 4% 12% AFFF 10% 4% Other© Institute for Fiscal Studies
  5. 5. Over the next few years • An unprecedented squeeze on public service spending • Returning it to 2000 levels as a percentage of GDP • With different departments affected differently – And health again relatively protected – And its share of spending continuing to rise© Institute for Fiscal Studies
  6. 6. Pattern of DEL changes 2010-11 to 2014-15 International Development 37.8% Energy and Climate Change 6.5% NHS (England) 1.0% Defence -8.2% Education -11.9% Total -11.5% Transport -14.5% CLG: Local Government -20.7% Home Office -22.0% Justice -27.2% Environment, Food and Rural Affairs -27.6% Business, Innovation and Skills -31.2% Culture, Media and Sport -46.1% CLG: Communities -71.3% -100% -50% 0% 50% Percentage real increase, 2010–11 to 2014–15© Institute for Fiscal Studies
  7. 7. OBR projections going forward • Based just on demographic change • Otherwise central forecasts assume health spending rises just with GDP – 2% a year© Institute for Fiscal Studies
  8. 8. OBR central projection % of non-interest spending 2010−11 2060−61 Education 14.3 12.0 Long term care 2.9 4.8 Public service pensions 4.5 3.4 Other social benefits 14.0 12.0 Pensions and pensioner benefits 15.6 21.8© Institute for Fiscal Studies
  9. 9. OBR central projection % of non-interest spending 2010−11 2060−61 Education 14.3 12.0 Long term care 2.9 4.8 Public service pensions 4.5 3.4 Other social benefits 14.0 12.0 Pensions and pensioner benefits 15.6 21.8 Health 18.6 23.5© Institute for Fiscal Studies
  10. 10. OBR central projection % of non-interest spending 2010−11 2060−61 Education 14.3 12.0 Long term care 2.9 4.8 Public service pensions 4.5 3.4 Other social benefits 14.0 12.0 Pensions and pensioner benefits 15.6 21.8 Health 18.6 23.5 Other non interest spending 30.1 22.5© Institute for Fiscal Studies
  11. 11. And if health spending grows 1% p.a. over GDP % of non-interest spending 2010−11 2060−61 Education 14.3 10.6 Long term care 2.9 4.2 Public service pensions 4.5 3.0 Other social benefits 14.0 10.6 Pensions and pensioner benefits 15.6 19.3 Health 18.6 32.1 Other non interest spending 30.1 20.0© Institute for Fiscal Studies
  12. 12. Percentage of non-debt interest spending© Institute for Fiscal Studies 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0% 2010-2011 2012-2013 2014-2015 2016-2017 2018-2019 2020-2021 2022-2023 2024-2025 2026-2027 2028-2029 2030-2031 2032-2033 2034-2035 2036-2037 2038-2039 2040-2041 2042-2043 2044-2045 2046-2047 2048-2049 2050-2051 2052-2053 OBR projections of spending to 2060 2054-2055 2056-2057 2058-2059 2060-2061 Health benefits Education Long-term care Other spending Other social benefits Public service pensions Pensions and pensioner
  13. 13. Going forward state is set to change further • OBR projections suggest that health and pensions alone could account for more than a half of non-interest spending by 2060 • On these assumptions education spending falls from 14% to 11% of the total • Unless – Total spending increases – Other spending falls even more sharply – Health spending is reformed and reined in© Institute for Fiscal Studies
  14. 14. Conclusions • The shape of public spending changes over time • Last 30 years have seen health and social protection spending increase a lot • Defence, “economic” spending and housing have taken a big hit • Going forward there are continued pressures on health and other age related spending • If accommodated the shape of the state will alter beyond recognition – And if it is not also to increase in size we’ll need to find some new losers© Institute for Fiscal Studies

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