King’s Fund study ranks UK 13th out of 15 original EU members and casts doubt on ministers’ claims they are giving the NHS generous cash settlements

Britain’s spending on its health service is falling by international standards and, by 2020, will be £43bn less a year than the average spent by its European neighbours, according to research by the King’s Fund.

The UK is devoting a diminishing proportion of GDP in health and is now a lowly 13th out of the original 15 EU members in terms of investment, an analysis for the Guardian by the thinktank’s chief economist shows.

Prof John Appleby also found that the government’s decision to increase the NHS’s budget by far less than the anticipated growth in GDP meant the service would miss out on what would have been an extra £16bn by 2020.

What would you like to see from the NHS' mental health services? Read more

Ministers highlight that they are giving the NHS in England an increasing share of overall government spending, ringfencing its budget and handing it annual increases totalling £8.4bn in real terms by 2020-21, despite very tight public finances.

But the King’s Fund figures have cast doubt on ministers’ repeated claims that they are giving the NHS generous cash settlements. Critics argue that Britain is becoming “the sick person of Europe” in terms of health spending because the sector receives one of the lowest levels of investment compared with many European countries, such as France and Germany.

Appleby warns that Britain’s status as an increasingly “low spender” might mean the NHS cannot deliver improvements in the quality of care and outcomes from treatment that patients want.

“No amount of spin from ministers can disguise the fact that this decade is set to be marked by the longest and deepest squeeze on NHS finances in a generation. Our country is increasingly looking like the sick person of Europe, with spending on health falling far behind other neighbouring countries,” said Heidi Alexander, the shadow health secretary.

“This squeeze on health spending is bad for the NHS and it is bad for patients. It is clear that our health service is going to need much more money than this government is prepared to spend.”

That health spending as a proportion of GDP has been “slipping backwards” means Britain is now behind Finland and Slovenia on that measure, according to a league table of the Organisation for Economic Cooperation and Development’s 34 member countries, Appleby added.

In an article for the King’s Fund detailing his findings, Appleby writes: “UK GDP is forecast to grow in real terms by around 15.2% between 2014-15 and 2020-21. But on current plans, UK NHS spending will grow by much less – 5.2%.

“This is equivalent to around £7bn in real terms, increasing from £135bn in 2014-15 to £142bn in 2020-21. But if spending kept pace with growth in the economy, by 2020-21 the UK NHS would be spending around £158bn at today’s prices – £16bn more than planned.”

The latest OECD data shows that the UK spent 8.5% of its total GDP on healthcare in 2013, though that includes a small amount of private spending, such as private medical insurance. “This placed the UK 13th out of the original 15 countries of the EU and 1.7 percentage points lower than the EU-14’s level,” Appleby said, referring to the EU 15 without the UK.

“If we were to close this gap solely by increasing NHS spending, and assuming that health spending in other UK countries was in line with the 2015 spending review plans for England, by 2020-21 it would take an increase of 30% – £43bn – in real terms to match the EU-14’s level of spend in 2013, taking total NHS spending to £185bn.”

The result of failing to keep pace with international health spending is that the gap has started to widen between Britain and many of its neighbours.

“Whatever the flaws of international comparisons, it’s clear that the UK is currently a relatively low spender on healthcare, with a prospect of sinking further down the international league tables,” Appleby said.

When he was prime minister in 2000, Tony Blair promised to increase health spending to the then EU average of 8.5% of GDP, a pledge Labour fulfilled under Gordon Brown in 2009.

However, given the huge sums thrown up by both Appleby’s calculations, Alexander refused to say whether Labour would commit to increasing health spending to either the EU average, which is now 10.1%, or as a proportionate share of rising GDP.

NHS has the west's most stressed GPs, survey reveals Read more

Norman Lamb, a Liberal Democrat health minister in the coalition until last May, said the Office for Budget Responsibility had recently acknowledged that the NHS in England would receive a falling percentage of national income until 2020.

Lamb said: “These new figure show why we can’t just keep sleepwalking into a disaster. The NHS and care systems will crash if we carry on as we are because the current amount [going into the NHS] is not enough and everyone in the NHS knows it.”

He called for political parties and others to join in a “national conversation” on how much money the health and social care systems would need in coming years, given the ageing population, and how it should be paid for.

Stephen Dorrell, the ex-Conservative health secretary who is now the chair of the NHS Confederation, said he suspected ministers would give the NHS in England more than the promised £10bn before 2020 and that funding would grow again, by somewhere between £16bn and £43bn, soon after 2020.

Ministers declined to comment on Appleby’s figures. The Department of Health said it was giving the NHS the extra money that its chief executive, Simon Stevens, had said it needed by 2020 in order to keep providing good care while also changing how services operate.

“Rather than there being a political decision about levels of spending on healthcare, for the first time ever, the NHS said collectively in the Five Year Forward View what it needed for the future to transform services for patients,” a spokesman said.

“We’re meeting our side of the bargain, with £10bn more from a strong economy, raising the NHS budget to the highest level in its history and increasing spending every year. We will also ensure the NHS gives good value for taxpayers.”