How does the UK compare?

Although the UK is similar to the EU14 average in overall health care spending as a share of GDP, its share of spending on capital is much lower. Capital-spending data across countries are only available for ‘fixed capital formation’ – that is, the purchase of assets (for example, buildings and scanners) minus the sale of assets in that year. R&D spending by the DHSC may be counted if it involves the purchase or sale of an asset, or leads to intellectual property. PFI and all other private capital spending in health care will also be included. Between 2004/05 and 2010/11, PFI spending averaged about £1.5bn a year.

Figure 2 shows UK capital spending on health care from 2000 compared with other OECD countries. From 2004 to 2009, the UK had large growth in capital spending, bringing it up to the average of comparable countries, at just over 0.5% of GDP. Since then there has been a large fall to 0.27%, meaning it is now at the very low end. Capital spending on health care fluctuates more than revenue spending on health care, as it reflects long-term investment decisions, which are far more sensitive to the state of the economy.

Figure 2: Fixed capital formation in health care, 2000–2016, OECD countries

Source: Organisation for Economic Co-operation and Development (OECD) data for OECD countries for which data for all years were available: Austria, Canada, Denmark, Finland, France, Greece, Ireland, Norway, Sweden, USA.

Only a small fraction of the fall in capital spending as a share of GDP is explained by capital-to-revenue transfers in the NHS. For example, in 2016, without a capital-to-revenue transfer in the NHS, capital spending would have been, at most, 0.30% of GDP (compared with the actual figure of 0.27%). This means that the original capital-spending plans would still have been very low by international standards without any transfers. Most of this trend is driven by decisions on how to allocate funds; the UK spends less of its total health care spending on capital compared with other health care systems. For the UK to move up to the average for OECD countries, capital spending would have to almost double as a share of total health spending.

Using the newest OECD data, the cost of bringing the UK up to the OECD average of capital spending as a share of GDP in 2016 would have required an additional £5bn across the UK. We estimate the cost of bringing England up to the OECD average of capital spending as a share of GDP in 2019/20 would require capital funding of £9.5bn, which is an additional £3.5bn (58%) on the 2018/19 capital budget. The autumn 2018 budget has planned for a £6.6bn capital budget for 2019/20. This would rise to about £4.5bn by 2023/24, based on capital-spending levels in 2018/19 and expected GDP growth.

Low levels of capital spending have meant the NHS has been unable to purchase new equipment. Among EU15 and G7 countries, the UK has the lowest number of both CT and MRI scanners per capita, with less than a third of that in Germany (Figure 3). To bring the UK up to the average number of MRI and CT scanners would require approximately £1.5bn in extra capital spending. Consistent with the low rate of diagnostic equipment, the UK also performs well below the OECD average number of CT and MRI scans.

Figure 3: CT and MRI scanners per million population, EU15 and G7 countries, 2016 or nearest years

Source: Organisation for Economic Co-operation and Development (OECD) data for EU15 and G7 countries for which data were available.

Note: UK data are from 2014.

Combined with workforce issues, the low number of scanners raises concerns about the NHS’s ability to deal with future health care needs. The NHS Long Term Plan states that funding to be negotiated in the 2019 Spending Review will be used to purchase new equipment, specifically CT and MRI scanners.

** 'EU14' refers to the first 15 countries to join the European Union (EU15), minus the UK: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden.

†† To calculate the estimate for England, we projected the OECD average gross fixed capital formation on to UK GDP, adjusting for the contribution of England. We then compared this amount to CDEL to estimate the difference.

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