Making good the shortfall

The analysis above focused on the changes to the public health grant and how this has affected provision. Simply reversing funding cuts will not be sufficient. Demand for children’s services can be expected to increase, with projected increases in the child population and the level of child poverty. To gauge the potential shortfall in the public health grant, this section considers the funding gap through a number of different lenses:

  • investment relative to the NHS
  • re-profiling spend as if the latest ACRA formula were applied
  • changes in demand since the grant’s introduction.

How the public health grant compares with overall health care spending

In 2013/14, the public heath grant was 2.8% of the NHS spend (that is, NHS England RDEL). It has since reduced in real terms. NHS spend has been relatively protected compared with the public health grant and wider government spending, so it is no surprise that the original core grant is expected to equate to 2.1% of the NHS spend in 2018/19 (Figure 9). Taking into account the pledged funding boost to the NHS, and making the optimistic assumption that public health grant funding will increase in line with real-terms growth from 2019/20, the grant could equate to only 1.7% of NHS spend by 2022/23.

Figure 9: Public health grant funding as a share of health spend under different scenarios (2013/14 to 2022/23)

Source: Health Foundation analysis of published data.,,,,

Maintaining the core public health grant as a 2.1% share of total health spend would require an additional investment of £0.5bn a year by 2022/23. Restoring the public health grant to its historic share of 2.8% of the NHS spend would require extra spend of £1.4bn a year by 2022/23. This exercise highlights the relative magnitude and prioritisation of spend between health care and health. It does not seek to estimate the level of spend that would be sufficient to maximise health outcomes.

Keeping pace with cost and demographic change

The public health grant has fallen in real terms since its funding peak in 2014/15. The cost of service provision and demand for services have both changed. Changes to the age profile of the population and therefore the relative demand for different services, and changes in levels of economic disadvantage, also drive demand for services, especially for children.

Maintaining spend in real terms since the 2014/15 peak: £0.7bn gap

The public health grant has been falling in real terms (and cash terms), meaning that the power of the grant to purchase health care goods and services has been falling. To calculate the size of this real-terms gap in spending, it is assumed that the core element of the grant will keep pace with gross domestic product (GDP) growth to 2019/20, based on out-turn and Office for Budget Responsibility projections. It is also assumed that spending on services for children 0–5 years of age will keep pace with GDP growth since its first full year in 2016/17.

Accounting for demographic and social change: £0.6bn gap

Even if the grant were restored to 2014/15 levels, this would not consider the fact that population needs have increased since that time. The ACRA formula provides detailed information on the projected demand for sexual health, alcohol and drug abuse and children services in each local authority. The estimates are based on the population of different age groups in each area and, for children’s services, the level of child poverty. To assess how that need has increased over time, the change in population by age group has been applied to the related cost using Office of National Statistics population estimates for 2013/14 and projections for 2019/20 at a local authority level. The rate of child poverty in each local area is estimated to increase in line with (rising) child poverty projections for the whole of the UK produced by the Institute for Fiscal Studies.

Aligning spending with need

The public health grant was introduced with the intention, at least, of better aligning spending with need. Given this aim, an approach that takes into account differences in mortality, poverty and local need for specific services certainly makes sense. The ACRA formula was developed along those lines, and is a sound basis for considering the optimum allocation of funds. (Although alternative methods to distribute funds obviously exist, analysis of these is beyond the scope of this briefing.)

ACRA usually recommends a pace of change with differential growth to meet a final allocation over the longer term. At present, consultation about the formula relates to its final allocation, rather than how to move towards it, given the context of ongoing cuts to the grant.

Overnight implementation of the spending allocation suggested by the ACRA formula, restoring the public health grant in real terms, and without any area experiencing a loss, would require a £3.2bn increase in spending. £2.5bn of this is accounted for by the reallocation, and the remaining £0.7bn by restoring the public health grant to its real-terms value (at its peak in 2014/15). The reallocation estimate is reached by finding the local authority facing the greatest potential reduction in funding due to the ACRA formula, maintaining their current level of funding and then allocating all other spend relative to this value. In practice, implementing this allocation could occur over several years, with differential growth rates applied to the areas furthest away from the formula allocation. However, given the scale and pattern of funding cuts, the government should reinvest £1.3bn in 2019/20 to restore the real-terms reduction in spend (£0.7bn) and target additional funding on the most-deprived areas while moving towards the ACRA allocation (£0.6bn). If that is to be achieved without further real-terms reductions in spend in any area, then setting such a path would require an above real-terms increase in the grant until the final allocation is reached to allow for such differential growth.

Figure 10 compares the funding gaps we have identified. The public health grant is expected to be £3.1bn in 2019/20. Simply accounting for changes in costs and demand for services by then would require an additional £1.3bn of funding. However, this would do nothing to ensure that allocations best meet local need, which is what the ACRA formula seeks to achieve. Overnight implementation of funding in line with the ACRA formula, accounting for changes in costs and without making any local area worse off, would require £3.2bn of additional funding – more than doubling the expected budget.

Figure 10: The public health grant ‘gap’ in 2019/20 (2018/19 real terms)

Note: Real terms refers to 2018/19 prices, using the Gross Domestic Product deflator from the Office for Budget Responsibility.

Source: Health Foundation analysis of published data.,,,,

Resource Departmental Expenditure Limit (RDEL) is the funding of day-to-day service provision and administration.

§ There are a small number of exceptions to this rule where there remains a small gap in allocations; here we simply fill the gap with a transitional cash payment.

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