NHS will need extra £20bn a year by 2020, says thinktank The IFS says a range of options should be considered for the NHS, including rethinking levels of taxation needed. Photograph: Justin Kase/Alamy The health service will need an extra £20bn a year by the end of the decade to meet patient demand and implement the Dilnot report into social care without cutting other essential services - a level of funding that means ministers should contemplate charging for the NHS and tax rises, a leading thinktank will say on Wednesday. The Institute for Fiscal Studies (IFS) says in a report that England's NHS budget squeeze - with savings of £20bn up to 2015 - is already the "tightest four-year period for the last 50 years." NHS spending will be essentially flat in real terms - at about £110bn a year - until 2015. However, with the NHS accounting for 23% of government spending, plus an ageing population, rising patient expectations and expensive new drugs on the horizon, the thinktank warns that in the last half of the decade a mixture of charging, tax rises and perhaps even greater borrowing will be needed. The IFS considers a range of scenarios from the beginning of the next parliament in 2015 until 2022 - and calculates the tax gap between spending and receipts if public spending were to rise. The analysis factors in the £10bn of welfare cuts called for in the March budget. The authors also consider the Dilnot recommendations for the elderly, which argue that lifetime costs for social care needed to be capped at £35,000 - and that council-funded home help and care home places for the elderly and adults with disabilities should be offered to everyone with less than £100,000 of assets, up from the current limit of £23,250. There are growing concerns within the Treasury about the cost of the changes while meeting the political charge that this would be a sop to wealthy baby boomers. However, the IFS says if the NHS were to cope with the rising cost of an elderly population, Dilnot's proposals were implemented and other government spending kept growing to 1% a year, the extra cost every year would be £19.5bn. Even if the elderly are discounted from the calculations the cost runs into billions of pounds. The IFS suggests that after 2015, even if NHS spending were just to keep pace with projected economic growth - at 2.4% - and letting other public spending to rise at 1% a year, there would be a need for an "increase in taxation, borrowing or further welfare cuts of roughly £9bn." This it says is equivalent to increasing VAT by 2% from its current level of 20%. Carl Emmerson of the IFS said "serious consideration should be given to the options for the NHS, which include reviewing the range of services available free at the point of use and reconsidering the level of taxation needed to finance them." The study reveals the cost of "tax and spend" politics. To keep the share of public spending as a percentage of GDP constant after 2015 the IFS calculates it would need an additional £44bn of "tax increases or extra borrowing" - the equivalent tax burden of £1,400 for every family in the UK.