• Government agrees average 3.4pc annual growth for five years
  • Deal only applies to NHS England’s budget – not the whole health budget
  • Improves on settlements since 2010, but is lower than long-term average growth
  • Follows tense negotiation and lobbying by the health secretary and the sector

The government has agreed to increase NHS England’s budget by an average of 3.4 per cent in each of the next five years.

The real terms’ increases – which would amount to £4-4.5bn per year and be partly funded through tax rises – are set to be announced by the prime minister following her pledge for a long-term funding settlement.

HSJ understands the phasing of the increases is due to be announced as: 3.6 per cent in 2019-20 and 2020-21, followed by 3.1 per cent in 2021-22 and 2022-23, then 3.4 per cent in 2023-24.

The deal was agreed on Friday between the prime minister, chancellor and health and social care secretary, following difficult negotiations, and months of apparent lobbying by Jeremy Hunt.

The increases only apply to NHS England’s total funding – which pays for NHS care – and not the wider Department of Health and Social Care, which also covers a number closely related budgets such as health education and training, and public health.

The senior source said the prime minister and Chancellor had agreed as part of the deal to commit to a degree of protection for budgets including education and public health – and also to social care – but it is not clear what this will mean in practice.

If the DHSC non-NHS budgets rise in line with inflation, the new settlement would represent an average annual increase of around 3 per cent to overall health funding.

This is significantly higher than the average increase since 2010, which has been just above 1 per cent, but still below the 3.7 per cent average increase since the NHS was launched in 1948.

Overall health budget changes since 1979

Chart shows overall real terms change in the health budget each year, based from 2019-20 on the newly announced growth in the NHS England budget and assumed flat real terms growth in other health budgets 

The new settlement is also significantly lower than the 4.3 per cent annual growth in the Office for Budget Responsibility’s projection of future need.

In a statement, 10 Downing Street said the settlement “reflects the fact that the NHS is the Government’s top spending priority” and that the extra funding will see the NHS grow faster than the economy.

It said the funding will come in part from a “Brexit dividend” – money that will no longer be sent to the European Union – as well as through unspecified tax increases.

“In return”, it said the NHS will produce a “new long-term plan led by doctors”.

The announcement comes ahead of the NHS’s 70th birthday celebrations next month, and Jeremy Hunt, health and social care secretary, said: “This long-term plan and historic funding boost is a fitting birthday present for our most loved institution.”

Health Foundation director of research and economics Anita Charlesworth said: “This will help stem further decline in the health service but it’s simply not enough to address the fundamental challenges facing the NHS or fund essential improvements to services that are flagging.”

NHS England chief executive Simon Stevens said: “As the NHS turns 70, we can now face the next five years with renewed certainty. This multi-year settlement provides the funding we need to shape a long term plan for key improvements in cancer, mental health and other critical services.”

NHS Improvement chief executive Ian Dalton said: “This settlement is good news for the NHS, those who use it and those who work for it. As we go into our 70th year, it will enable the dedicated staff in our NHS to go on improving the care we can offer the patients of this country with certainty and confidence.

“We are determined to secure the maximum benefit for our patients from every new pound spent gained as part of this settlement. The NHS is already making significant productivity improvements and we will not let this vital work slip.”

Updated on 17 June to update information on the expected phasing of NHS England budget increases.