June 10 (Bloomberg) -- The U.K.’s state-run medical system faces a 15 billion-pound ($24.5 billion) deficit in the next decade as economic woes and government debt crimp funds, according to a group representing regional health authorities.

The National Health Service, Europe’s biggest employer, should expect only slight increases in available funds from 2011, the NHS Confederation said in a report posted today on its Web site. At the same time, demand for care will rise, fueled by an aging population, more births and the increase in alcohol abuse and mental illnesses spawned by the economic recession, the report said.

Prime Minister Gordon Brown has told the public sector to expect a clampdown on spending to narrow the biggest budget deficit since World War II. Non-investment spending is forecast to rise by 0.7 percent more than the rate of inflation, starting in April 2011, and the Treasury will decide how much each department will get until 2014 in a review scheduled to be published next year.

“In previous expenditure squeezes, most which have been less severe and were less protracted than this one will be, questions were raised about the sustainability of the NHS model and the capacity of NHS management to deal with the challenge,” the confederation said in the report.

U.K. public spending will be “dominated by the need to service debt,” according to the report. Threats to funds will also be exacerbated by a “very likely upswing” in flu cases this coming winter and a possible rise in energy prices, the confederation said. New drugs and devices are expected to pressure costs by as much as 0.5 percent, the report said.

Conservative leader David Cameron has warned of a period of “austerity” if his party wins the next general election, which has to be held by June 2010. Brown says health and education would face real cuts in spending under the Conservatives.

Without the cash increase, the NHS expects funding to decline by 2.5 to 3 percent a year, adjusted for inflation, starting in 2011. That’s equal to a 15 billion-pound reduction over five years, according to the report. The agency’s payments are expected to rise 4.1 percent from 2010 to 2011 to 102.3 billion pounds.

To contact the reporter on this story: Trista Kelley in London at tkelley2@bloomberg.net

Last Updated: June 10, 2009 08:37 EDT