In this audio slideshow, Anita Charlesworth, Chief Economist, Nuffield Trust, describes the key findings from our research examining patterns of spending on health, drawing on the accounts data of hundreds of strategic health authorities (SHAs), hospital and mental health trusts, and commissioning organisations dating back to 2003/4. The full findings were published in the report: The anatomy of health spending 2011/12: a review of NHS expenditure and labour productivity (Nuffield Trust, March 2013), which forms part of an ongoing research programme the Nuffield Trust is undertaking, supported by PwC and McKesson.

1. Trends in health spending & productivity
Anita Charlesworth, Chief Economist, Nuffield Trust
5 March 2013 © Nuffield Trust

2. The scope of the research
• It provides an overview of the annual accounts data for all primary care trusts (PCTs), NHS
trusts and NHS foundation trusts in England for each year from 2003/04 to 2011/12.
• It includes information from acute hospitals, specialist hospitals, ambulance services,
community services and mental health providers.
• The figures are shown in real terms (i.e. allowing for inflation) in 2011/12 prices, adjusted
using the November 2012 GDP deflator.
• Labour productivity is measured using an estimate of cost-weighted activity and spending on
workforce.
• Labour productivity is calculated for the 110 acute hospitals which have operated
continuously since 2006/07 and have not merged with a community health service.
• This measure of productivity has several drawbacks – in particular it doesn’t take account of
quality of care or the appropriateness of treatment.
© Nuffield Trust

3. Government spending on health in the UK
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4. Spending on health in England 2011/12
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5. Percentage changes in spending by type of care:
2010/11 to 2011/12
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6. Distribution of surpluses/deficits: 2011/12
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7. Spending changes by staff numbers and cost per head:
2003/04 to 2011/12
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8. Spending on private finance initiative (PFI) interest in
England: 2009/10 to 2011/12
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9. Changes in UK health care productivity (NHS and non-NHS
providers) – ONS measure: 1995 to 2010
© Nuffield Trust

10. Variation in labour productivity at selected providers in
England: 2006/07 to 2011/12
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11. Variation in labour productivity by region: 2011/12
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12. Summary – spending patterns
• Health spending in England in 2011/12 was £105.4 billion – a 0.3 per cent
increase in real terms.
• There was a £1.4 billion underspend on the health budget in 2011/12.
• The number of hospitals in deficit has been rising steadily since 2007/08 –
32 out of 250 trusts ended the year in deficit in 2011/12.
• The financing costs of PFI scheme are a small proportion of the total health
budget (less than 1 per cent) but they have increased rapidly. Seven hospitals
are now spending more than 5 per cent of their income on PFI financing costs.
• Spending on community health services has grown most rapidly in recent years
in line with the policy of shifting more care into community settings.
• Spending on hospital care has also grown very rapidly, with spending on GP
services falling. © Nuffield Trust

13. Summary – labour productivity
• There appears to have been relatively little improvement in labour productivity in
NHS acute hospitals since 2006/07.
• Measures of NHS productivity are likely to systematically underestimate the
overall performance of the services, as the NHS has no measure of the output
of community services.
• Labour productivity varies across the country and seems to be higher in the
South and lower in the North. London appears to have below average labour
productivity but this may be explained by the lack of quality adjustment in our
measure and the importance of teaching and research in London hospitals.
• Hospitals with a higher proportion of medical and dental staff are more likely to
have higher productivity despite the higher labour costs of a richer staff mix.
© Nuffield Trust

14. www.nuffieldtrust.org.uk/nhs-spending
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anita.charlesworth@nuffieldtrust.org.uk
5 March 2013 © Nuffield Trust