How is the NHS funded?
By Luke Aldred
Whether you work in the NHS or are simply a grateful recipient of the free healthcare it provides, you'll appreciate how important it is to our nation. But have you ever wondered where all the money comes from to keep the service up and running?
So, how is the NHS funded?
Well, the NHS is mainly funded through general taxation, boosted by National Insurance contributions (NICs). In 2003, NIC rates were increased to provide additional funding for the NHS. However, the majority of money still comes from income taxes.
A small proportion of NHS funding comes from revenue. That includes patient charges, for example costs for prescriptions and dental treatment. It also includes income from car parking charges, land sales and providing private healthcare services.
How much does the NHS cost per year?
The NHS England commissioning budget for 2022-23 is £153 billion. Most of this money (just under £108 billion) is allocated to local health services. Just under £30 billion is spent on directly commissioning services, including primary care services, specialised services and public health. The remaining money goes on service development and improvement programmes.
What is the annual Spending Review?
The amount that NHS England receives from taxation and NICs each year is set via the government's annual Spending Review. The government estimates how much National Insurance will be payable to the NHS and how much income it is expected to receive from other sources such as the user charges previously mentioned. If NICs or patient charges don't meet this estimate, the agreed level of funding is topped up from general taxation.
What about other nations in the UK?
Health services are devolved in Scotland, Wales and Northern Ireland and the respective governments set their own annual budgets. However, funding comes from a block grant for public services taken from UK-wide taxes, the size of which is based on the Barnett Formula.
Of the four UK nations, England has historically spent the least per head on healthcare and Scotland has spent the most. However, if the figures are adjusted to allow for the increased healthcare needs of older populations, Wales is actually the lowest spending country.
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