Spending plans for the NHS between 2011 and 2015 will be the tightest four-year period in the last half a century, financial experts warn.
Researchers from the Institute for Fiscal Studies warn that only a long-term fix in public service budgets or large tax increases will enable a return to the 4% average annual growth the NHS budget had become accustomed to.
The NHS, the report says, should now consider what services remain freely available as it tackles a decade of austerity and unprecedented savings targets.
The report, funded by the Nuffield Trust, found that NHS spending in the UK reached £137.4bn in 2010/11, with this cost in England accounting for a quarter of all public spending.
Authors said that continuing the freeze in NHS spending in England between 2015 and 2017 would mean reducing spending in other areas of public services by an average of 2.3% annually.
The Government increased spending on the NHS in its 2010 Spending Review by 0.1% each year in real terms. But the report found that increasing levels of money spent on healthcare in line with national income between 2015 and 2022 would still leave the NHS budget growing slower than demand for care in an ageing population.
Anita Charlesworth, Chief Economist, Nuffield Trust, said the NHS needs to plan a “medium-term future based on belt-tightening” and be prepared for future years of hardship.
Mike Farrar, NHS Confederation Chief Executive, said the NHS needs to be honest about the necessary action needed to deal with future challenges. “We need to forensically examine what services and treatments provide the best outcomes for patients and local communities, and what the NHS can and cannot afford to provide in the future,” he said.
“This will be far from pain-free, but decisive action is necessary if we are to maintain high-quality services and stay in the black. If the NHS does not change, it will not be fit for the future. We need swift action before the financial pressures overcome us.”
A spokesman for the Department of Health said it was well aware of the challenges facing the NHS. “Where the NHS can do things better and save money to reinvest in high-quality patient care, it must do so,” he said.