George Osborne this afternoon confirmed plans to increase NHS spending by around £2bn in 2015-16, funded largely on the assumption that other government departments will continue to underspend their budgets.

The chancellor’s autumn statement, published today, said the government would provide “£2bn of additional funding for the frontline NHS in England in 2015-16”, in support of the vision set out in the NHS Five Year Forward View.

The money is comprised of:

  • a £250m investment in improving out of hospital services, funded from fines paid by banks for exchange rate manipulation;
  • £700m of centrally held Department of Health and NHS England budgets that will be reallocated to NHS commissioners; and
  • a £1bn increase in the baseline NHS budget.

The latter chunk of money is expected to be funded by future underspends by other government departments.

Speaking in the Commons today, Mr Osborne said the government had “got the pace right” on cutting public spending.

He continued: “And because of careful management, we can afford to put part of that underspend money into our National Health Service to cope with the pressures it faces.

George Osborne

George Osborne said the government had ‘got the pace right’ on cutting public spending

“£2bn every year to the frontline of the NHS.

“Not money that busts our plans, but extra money available because we have a plan.”

However, the autumn statement document shows that other departmental budgets for 2015-16 have not been reduced in order to fund the planned increase in health spending.

Instead, it notes that £1.2bn of NHS funding – the cost to the Treasury of the additional spending once necessary allocations to the devolved parliaments are included – will be added to 2015-16 spending plans from central government reserves.

HSJ understands that the Treasury anticipates that other government departments will continue to underspend their budgets in 2015-16, and it will then reduce their budgets in year to cover the increased NHS spending.

Adam Roberts, a senior economics fellow at the Health Foundation, said it was “very sensible” to fund the increased spending from Treasury reserves. “I think reductions to other budgets that have already taken heavy cuts would have been quite substantial, without a clear plan for how those areas of public spending were going to deal with that,” he told HSJ.

The autumn statement also confirms that in total £1.115bn of exchange rate fines will be allocated to a fund spread over four years for improving GP and out of hospital services. This will cost the government £295m a year until 2019, including allocations to Scotland, Wales and Northern Ireland.

The chancellor said: “Instead of returning the foreign exchange fines paid by the banks back to the City, we are using that windfall for a £1.2bn investment in GP services across the UK.

“A down-payment on the NHS’s own plan.

“Proving definitively, for anyone in any doubt, that you cannot have a strong NHS without a strong economy.”

Mr Roberts said the Health Foundation was pleased to see the chancellor confirm the additional funding for the NHS would be added into the baseline budget for 2015-16, and would come on top of planned spending. He said health was now in line to receive a real terms increase of 1.5 per cent next year, against the 0.4 per cent increase which was planned in the last comprehensive spending review.

Elsewhere, the autumn statement floated the possibility of pooling some budgets across DH and Department of Work and Pensions budgets in the next spending review.

It said: “Over 40 per cent of unemployed people who claim employment and support allowance report a mental health condition as their primary health condition.

“In response to this, the government is piloting new ways to help people return to work. The Department for Work and Pensions and the Department of Health have invested £3m and, through growth deals, the Department for Communities and Local Government is funding a further £12m of pilots to test the provision of joined up services that better reflect the needs of claimants.

“[The] autumn statement announces a further £3m of funding to expand these pilots. The government will build on the findings from these pilots in the next spending review and explore how integrated budgets across health and employment could deliver improved and more efficient support to help this group return to work.”

The autumn statement also confirmed an investment of £45m next year in eating disorder services and dementia research.

And, in response to Monitor’s Fair Playing Field review of the barriers to equal competition between providers of NHS services, it committed to giving hospice charities the same VAT refunds available to the NHS.

Autumn statement confirms increase in NHS spending