Analysis: This budget could have a nasty sting in the tail for health

The big health announcement – a tax on sugary drinks to take effect from April 2018 – was rightly welcomed by health service leaders, but it will take some time for the public health benefits to be felt in the NHS’s bottom line.

Other potential implications for the health service will make less cheerful reading

Beyond that, the chancellor’s only direct nod to the health service was a small chunk of banking fines income handed out to four children’s hospitals – a crowd-pleasing move but such a tiny sum that it is materially insignificant to the NHS.

However, there are other potential implications for the health service in the budget that will make less cheerful reading.

With Office for Budget Responsibility forecasts for economic growth revised sharply downwards, George Osborne announced further measures to squeeze public spending and ensure he remains on course for a budget surplus by 2019-20.

Among these, the discount rate for public sector pensions has been reduced, meaning public sector employers’ contributions will rise by £2bn in 2019-20. The Treasury has not said what proportion of that cost is expected to be borne by the health service. However, the Nuffield Trust estimates that if it is in proportion to the service’s share of the liability, it could mean a cost pressure of about £650m on the NHS.

Given that real terms funding growth for the NHS is already projected to be very low in 2019-20, the think tank warns that this cost pressure could mean there being, in effect, a real terms cut.

In the same year, the chancellor is looking for further cuts to public spending above those announced in the 2015 spending review. He announced that the government would conduct a “departmental spending review, which will help deliver a further £3.5bn of savings from public spending in 2019-20”.

The bad news in the budget suggests a funding increase will be even harder to secure

According to the budget red book, these cuts will be made “while maintaining the protections set out at the spending review”, which means that NHS England’s budget, at least, will be protected. However, there is no reason to assume that other aspects of Department of Health spending – which were controversially left unprotected in the spending review – will be spared from these further cuts.

The broader point here is that the funding growth that has been allocated to the NHS in the current parliament is heavily weighted towards the next two financial years. There are serious concerns about how the health service will cope with the very low levels of growth it is due to receive in 2018-19 and 2019-20.

There are many who have quietly hoped that if the NHS does well on its gruelling efficiency targets in the next two years, it will be in a position to go back and ask the Treasury for an increase in funding levels planned for the latter years of the parliament. The bad news in today’s budget suggests that such an increase will be even harder to secure.