In late 2018 the chancellor announced an extra £20.5bn of spending on the NHS over the next 5 years, which works out to a long overdue rise of 3.4% a year in real-terms. This follows on from a period of meagre increases since the financial crisis of 2008, including a five year growth rate of 1.1% from 2009 - 2015 which is the smallest since records began back in 19551.
Very much welcome news which is coming at a time where pressure on the NHS is the greatest it has ever been. However, as we continue to age as a population the unfortunate truth of the matter is that this burden is set to continue to rise, perhaps even drastically when you consider additional factors like the obesity crisis and Alzheimer’s.
According to the office for national statistics by mid-2039 the number of people of State Pension Age and over will increase by 32.9% and the number of people aged over 75 will increase by 89.3%2. This, coupled with a recent study published in the Lancet (that followed trends in fertility from 1950 to 2017) which found that fertility rates have halved over that time period3, points to a perfect storm brewing on the horizon of a low working age population paying for an oversized elderly population that are living longer.
We are currently spending just under 8% of our national income on the NHS (Albeit this is relatively low when compared to some of our European neighbours at around 9%).4. Where this figure will end up, and the sort of budget increases that will be required to keep the NHS the institution it is today, is anybody’s guess but what is clear is that something will have to give.
So, what does this all mean? Well, at a time when some very unpopular increases to the state pension age are starting to kick in the government is likewise going to have to make some very difficult decisions regarding the future of the UK’s healthcare budget. This will most likely result in a very different NHS from the one that we know today.
Whatever the future NHS looks like, one thing is almost certainly clear. In the future, those of us that have access to a private alternative, either through paying directly or purchasing insurance, are going to have a greater choice about the type of healthcare that they receive and when and where they receive it.
This leads to an important question that each one of us should ask ourselves now. How important will having this choice be for us in the future, particularly at a time when we will probably need it the most? The answer to this question will determine how much we need to save for retirement, and in making this conscious choice we will need to consider the difference between just providing an income for ourselves and also being fully able enjoy it.
Indeed, it is now being reported that the Local Govenment Authority (LGA) are in consultation discussing a number of improvements measures, one of which is the introduction of a new 2.5% income tax on workers aged over 40 to pay for future social care costs5 which, like additional state pension payments of the past, can be contracted out of. This may be a sign of things to come. But whatever happens, we each need to start rethinking how our future healthcare needs are going to be met.
So, much like people currently contribute to their personal pension pots to supplement their state pension entitlement, could we be seeing a future where we are consciously contributing to our pension pots to supplement our future social and health care needs?
- Page 4 of the Institute for Fiscal Studies UK Health Spending
Table 4: Projected population by age, United Kingdom, mid-2014 to mid-2039 of the National Population Projections: 2014-based Statistical Bulletin
Population and fertility by age and sex for 195 countries and territories, 1950–2017: a systematic analysis for the Global Burden of Disease Study 2017
Table on Page 30 of the report. Title: Health spending accounts for nearly 10% of GDP in the EU; Germany, Sweden and France allocate 11% or more of their GDP to health spending
Local Government Association News Article, LGA launches own green paper as adult social care reaches breaking point
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