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.

1. Implications of a recession for
the NHS:
A freeze…or worse?
Prof John Appleby
Chief Economist

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. Bail outs and rescue
packages…..

8. NIESR recession tracker

9. Public sector net debt projections (IFS)

10. ‘Fiscal tightening’ options and government net debt

11. “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

12. NHS funding and previous
recessions

14. Future NHS funding

15. 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

16. Funding the scenarios…
• Impact on other spending departments
• Consequences for taxation

17. 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

18. 1.5% for other
departments, 3% for
NHS = £17.1 billion tax
rise.
£540 per family,
4% on VAT

22. Filling the gap?
• Tax increases/cuts in other departments?
• A bigger bang per NHS buck….

23. 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

24. ‘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