Fall in health funding advantage raises “real concerns” about healthcare delivery

Growing cost pressures and a slower growth in the available budget when compared to England represents a “material risk” to the financial sustainability of healthcare delivery in Northern Ireland.

Health spending in Northern Ireland has fallen below that of England for the first time and is set to stay that way until at least 2025, meaning that spending will not address Northern Ireland’s significant health needs.

The Northern Ireland Fiscal Council’s report on the sustainability of the health service says that analysis of the Northern Ireland Executive’s draft budget and spending plans for the Department of Health show that health spending in the region is growing at a significantly slower rate compared with the Department of Health and Social Care in England (DHSC).

For the past 20 years, until 2020/2021, health spending per capita in Northern Ireland has been roughly 7 per cent higher than in England, representing an additional £181 per person. However, recent budget implications mean that health spending per head has fallen below that of England for the first time in 2022/23 and will remain between 2 to 3 per cent lower until at least 2024/25.

Previously, analysis suggested that the overall need for health and social care expenditure in Northern Ireland was 107 and 109 per cent of that of England, with the relative need for health spending alone, slightly lower. However, it is now expected that the relative level of health spending compared to England is also expected to fall below the latest measures of relative health need.

“The slower growth in health funding more recently means that Northern Ireland would not be able to afford to deliver the same standard of services as in England unless it ran its services more efficiently than they are run in England,” the report states.

While one-off annual health budgets have contributed to the relative drop in health spending, the primary cause is the expectation that the block grant will fall relative to the UK Government equivalent spending per head of the population in the coming years. Health spending is expected to be 39 per cent of the Executive’s block grant in 2024-2025, compared to 36 per cent in 2014-2015.

Historically, larger spend per capita on health in Northern Ireland relative to England has been explained as necessary because health outcomes are worse and therefore spending need is greater. While the Fiscal Council report does flag that worse outcomes could also be a result of policy delays or inefficiencies in the health service, it highlights some areas where outcomes are worse. The report suggests that, while the additional need for spending on health in Northern Ireland relative to England does not appear to be as high as is sometimes assumed, a range of between 4 and 7 per cent additional need for health spending is probable.

Analysis by the Nuffield Trust to support the Fiscal Council’s report shows that the costs for providing hospital services in Northern Ireland are higher than those in England. Although not directly comparable, estimates show a 36 per cent higher cost for hospital care, despite serving a smaller population. The average cost of patients admitted to hospital in Northern Ireland rose by 28 per cent in Northern Ireland between 2015/2016 and 2019/2020, compared to an 8 per cent increase in England over the same period.

The Fiscal Council agrees with the Nuffield Trust’s analysis that there is significant inefficiency in the Northern Ireland health system, highlighting examples such as a 1.5 days longer average length of hospital stay per admission in Northern Ireland than in England, a four times greater wait for planned care in Northern Ireland, and a 43 per cent higher spend on drugs per capita compared to England by Northern Ireland pharmaceuticals.

Included in the Fiscal Council’s report were long-term projections for healthcare spending which highlight the need for actions to alter current business-as-usual. Although spending will be dictated by the Northern Ireland Executive and subsequently allocated by the Department through each budget process, the projection (what spending might occur if the Executive were willing to accommodate demographic and non-demographic pressures) is that health spending could be the equivalent of up to 77 per cent of the block grant.

The projected 2.3-3 per cent real-terms annual increase, if accommodated, would see Northern Ireland’s health spending increase from £5.5 billion in 2024-2025 to potentially up to £22.2 billion by 2071-2072.

“The combination of growing cost pressures and slower growth in the available budget compared with DHSC in England, represents a material risk to the financial sustainability of health care delivery in Northern Ireland over the short and longer term,” the Fiscal Council states.

“This will have serious implications for the delivery of both healthcare and wider public services.”

Options to address the financial challenges set out by the Fiscal Council range from Executive budget prioritisation, through to increasing efficiencies and increased funding from the UK Government.

The Fiscal Council says that the health sector needs to make “strategic use” of the funding it receives and emphasises the importance of longer-term planning, stressing that some elements of this planning remain possible in the absence of certainty over budget levels.

Stating that it is essential to address system inefficiencies to maximise the quality and quantity of services that can be provided within existing budgets, the report says that, while some inefficiencies may be “explainable” in terms of economies of scale, “it is still important to identify inefficiencies and to work towards minimising their effects”.

“While the level of health spending in Northern Ireland appears to have previously been broadly in line with relative need, lower rates of efficiency imply that the services delivered to the public were not of the same quality or quantity as in England,” the report states.

Highlighting that this has been reflected in the persistently longer waiting lists for hospital treatment in Northern Ireland, the Fiscal Council concludes: “The recent fall in health spending per head relative to England has exacerbated the situation with both funding and efficiency now lower than in England meaning that action is required on both fronts both over the next three years and the longer term.”