Health plans to squeeze other spending - report

By Christina Fincher

LONDON (Reuters) - A pledge by the country's two main political parties to protect the state-run health service means other departments will face sharp spending cuts, an influential fiscal report said on Monday.

With an election less than a year away, both Labour and the Conservatives have promised to 'ring-fence' health spending, despite a recession that has pushed the public deficit to a record post-war high.

The pledge will require either sizeable tax rises or hefty cuts to other areas, such as defence and education, after 2011, say researchers at the King's Fund and the Institute for Fiscal Studies.

If the National Health Service (NHS) were to receive a real increase of 2.5 percent a year from 2011 to 2017 -- less than half the typical increase of the past decade -- then other departments would need budget cuts of around 2.8 percent a year, the report said.

Departmental cuts could be limited to 2 percent a year while freezing the NHS budget, but only by raising additional revenue of around 10.6 billion pounds -- equivalent to 340 pounds for each family in the country.

If health spending were frozen in real terms, budgets for other departments would face a cumulative cut of around 8 percent over the six years to 2016/2017.

"Our analysis shows that the NHS is facing the most significant financial challenge in its history," said report co-author John Appleby, chief economist at the King's Fund, a healthcare charity.

"Both the Labour and Conservative parties have pledged to avoid cutting NHS spending in real terms from 2011 but this will come at a big price."