The NHS can’t outspend the problem

In our previous analysis, we traced 27 years of UK healthcare spending — from £65 billion in 1997 to £317 billion in 2024. The trajectory looked relentless: more money, every year, for a quarter of a century. But what happens when that trajectory meets a fiscal ceiling?

Previous analysis How much does the UK spend on health? £317 billion in 2024 — nearly 11% of GDP. We trace the trend, the public-private split, and what it buys.

Already behind our peers

The UK devotes roughly 10.8% of GDP to healthcare. That sounds substantial until you compare it to France at 12.1%, Germany at 12.7%, or the United States at 16.5%. Among the G7, only Italy and Japan spend a smaller share than we do.

The gap is even starker in per-capita terms. Adjusting for purchasing power, the UK spends around $5,100 per person on health. Germany spends $8,000. The Netherlands nearly $7,300. Closing the gap to the French level alone would require roughly £50 billion more per year — equivalent to the entire Home Office budget.

The defence ratchet

Now layer on a geopolitical reality that no government can avoid. In February 2025, the Prime Minister accelerated the UK’s defence spending target to 2.5% of GDP by 2027 — three years ahead of the previous schedule. To fund it, the overseas aid budget was cut from 0.5% to 0.3% of GNI, saving roughly £6 billion. It wasn’t enough.

Then, at The Hague in June 2025, NATO allies agreed to spend 5% of GDP on defence and security by 2035 — 3.5% on core military capability, plus 1.5% on resilience, critical infrastructure, and innovation. For the UK, that commitment means an additional £36 billion per year in today’s money — roughly £500 for every person in the country.

The squeeze is already here

This isn’t projection. The 2025 Spending Review numbers already show it. Non-defence departmental spending — which includes the NHS, schools, and policing — grows by 2.7% in real terms between 2025–26 and 2026–27. Then it goes almost flat between 2026–27 and 2027–28. The age of guaranteed real-terms growth for health is ending.

Health is already the single largest function of government spending — larger than social protection, larger than education, and far larger than defence. But its share cannot grow indefinitely when another function is demanding a step change in the opposite direction.

Seventy years of trading places

To understand why this matters, look at the long arc. In 1955, during the post-war consensus, defence took 7.6% of GDP. Health took just 2.8%. Over the following decades, as Cold War commitments wound down and the welfare state expanded, those shares steadily converged — and then crossed.

By 2022, defence had fallen to 2.1% of GDP. Health had risen to 8.5%. They had swapped places entirely — health now claims four times the share of national income that defence does. That growth was funded, in large part, by the peace dividend — the fiscal space created by shrinking military commitments.

That dividend has been spent. The 5% NATO target pushes defence back toward the share it held in the Thatcher era. The money has to come from somewhere — and health is the largest single block.

The three shifts

The government knows this. The NHS 10-Year Health Plan is built on three structural shifts — each designed to deliver better outcomes without proportional increases in spending.

“We need three big shifts in the focus of the NHS: from hospital to community, from analogue to digital, and from sickness to prevention.”

— Wes Streeting, Secretary of State for Health and Social Care

Hospital to community. Acute care is expensive. A & E attendances, emergency admissions, and inpatient stays consume a disproportionate share of the budget. Shifting routine monitoring, rehabilitation, and chronic disease management into community settings — supported by remote monitoring and digital tools — reduces the cost per patient contact.

Analogue to digital. The NHS still runs on paper referrals, fax machines, and unstructured clinical letters. Digitising pathways doesn’t just save administrative time — it creates the data infrastructure needed for population health management, predictive modelling, and resource allocation.

“Using AI to put the right patient in front of the right clinician at the right time… that is a real transformation in healthcare delivery.”

— Wes Streeting, Health and Social Care Committee

Sickness to prevention. The economics are unambiguous. Treating a condition late is orders of magnitude more expensive than detecting it early or preventing it entirely. Yet the UK spends just 5.5% of its health budget on prevention.

“Prevention is considerably cheaper than trying to treat people when they are already seriously ill. Governments have to invest in that.”

— Lord Bethell, House of Lords

Technology as the forcing function

Each of these shifts depends on technology. Not technology as a nice-to-have — technology as the mechanism that makes fiscal sustainability possible.

Early detection reduces downstream cost. AI-assisted imaging, liquid biopsy, and genomic screening catch cancers at stage one rather than stage four. The treatment cost difference is measured in tens of thousands of pounds per patient.

“AI is not just about clinical diagnosis… it is about better early detection, fewer missed cases, and faster treatment.”

— Lord Walmsley, House of Lords

Digital-first care reduces estates cost. Remote consultations, wearable monitoring, and algorithm-triaged pathways mean fewer outpatient visits, less clinical space, less travel, less waiting. For a system spending £12 billion per year on NHS estates, even marginal shifts matter.

AI reduces workforce pressure. The NHS has 130,000 vacancies. Training a consultant takes 15 years. AI-assisted diagnostics, automated scheduling, and clinical decision support don’t replace clinicians — they multiply the output of the clinicians who are already there.

But adoption remains slow. Technologies approved by NICE sit unused in trusts for years. The gap between evidence and implementation is where value is lost.

“We need to ensure that when NICE approves a treatment, it is rapidly made available to patients. Uptake has simply been too slow.”

— Sir Patrick Vallance, Government Chief Scientific Adviser

“We are behind where we need to be with medical technology. The NHS needs to move faster on adoption.”

— Baroness Merron, Parliamentary Under-Secretary of State for Health

What this means

The fiscal arithmetic is straightforward. Defence is going from 2.3% to 5% of GDP. Health already takes 11%. The government cannot credibly promise real-terms growth for both. One of them has to find a way to do more with less.

For health, that means technology adoption is no longer optional — it’s the only route to sustainability. The companies developing diagnostics, AI, digital health platforms, and remote monitoring tools are not just selling products into the NHS. They’re providing the mechanisms by which the health system survives the fiscal decade ahead.

The question for MedTech is no longer “is there clinical evidence?” alone. It’s “can you show a trust that this saves money and releases capacity?” The economic case has become as important as the clinical case. And the window for making that case is narrowing.

Health spending at 11% of GDP is not going to 13%. Not with defence heading to 5%. Not with an ageing population driving social care costs. The growth era is over. The efficiency era has begun.

Related analysis How much does the UK spend on health? The baseline data — 27 years of UK healthcare expenditure, the public-private split, and what it buys.