A positive spending review for the NHS, but tough trade-offs remain

The NHS was front and centre in the chancellor’s spending review, underscoring its importance to the health of the nation and the wider economy. The health service will see its revenue budget grow by 3% in real terms each year over the course of the spending review period, rising to more than £230bn by 2028/29. 

NHS trust leaders aren’t taking the additional funding for granted. Far from it. They know patients, taxpayers and ministers will rightly demand more bang for their buck from the NHS through shorter waiting times, better services and improved productivity levels.

But how transformative is that 3% real terms increase? For context, it’s an improvement on average rises in health spending since 2010 (most notably the 2010-15 period where growth was consistently below 2%). However, it still falls well short of the long-term real terms average growth in health spending (3.7%). 

The additional funding in the spending review comes with strings attached. The NHS is being asked, once again, to go further and faster. The NHS has already been tasked by government to deliver 2% productivity growth each year, releasing the equivalent of £17bn in savings over three years. 

As the results from our recent survey on the 'financial reset' demonstrate, trust leaders are doing all they can to reduce expenditure and improve productivity, including taking very difficult decisions over the course of this year on staff headcount and cuts to some services. Those tough trade-offs will continue despite the additional funding in the spending review. 

There are a number of long-term factors that could help to unlock further productivity growth in the NHS. The spending review offered some hope for investment in some areas but fell short in others. 

Trust leaders have continually flagged that estate-related issues have a significant impact on their ability to deliver more within constrained resources. It is very welcome that successive governments have understood the need to increase capital funding in recent years – but we are still feeling the effects of many years of underinvestment in the NHS estate. The government’s decision to hold capital budgets flat in real terms was disappointing and will only reinforce the concerns raised by trust leaders that there simply isn’t enough capital to go around.  

With the repairs bill continuing to rise each year, trusts will have little headroom to both address safety critical repairs at the same time as strategically investing in their estates to improve productivity.

In this respect the NHS is bucking the trend compared with other government departments which fared less well on revenue spending but did better on capital. This approach may reflect immediate government priorities on waiting times and urgent and emergency care, but it can only hinder progress on productivity and work to ensure the NHS is fit for the future. There is a risk this decision will come back to bite the NHS if the estate is not in a fit condition to manage ever-increasing demand, and there is not the capacity to deliver new models of care.

The government’s 10-Year Infrastructure Strategy recently announced they were considering the return of public-private partnerships in "very limited circumstances" for primary and community health infrastructure. This is a welcome step in the right direction and will offer a new route to capital investment for trusts looking to lead government’s efforts to shift more care out of hospital and into the community.

Hospital trusts working from ageing estates may feel this is a missed opportunity to grant them access to similar partnerships with the private sector to help them unlock significant productivity savings. However this may not be the end of the conversation. With Sir Jim Mackey confirming he wants the government to “introduce an off–balance sheet capital investment mechanism,” trust leaders will want to see the Treasury keep an open mind about all affordable, good value funding models and solutions to fix the serious challenges facing their estates.

Another area where the spending review fell short was on social care. While the government acknowledges the significant challenges facing the adult social care sector and committed to supporting a fair pay agreement for social care workers, there was precious little in the spending review on work to reform the funding of adult social care.

Grant funding for local authorities will only rise in real terms by 1.1% (£800m) over the course of the spending review period. An underfunded social care system will mean many more people missing out on services that could help them to live more independently and healthily at, or closer to, home. It will also hold back trusts’ efforts to improve productivity, reduce waiting times and move more care out of hospitals.   

In more positive news, the government is doubling down on its efforts to invest in delivering the three shifts: analogue to digital; treatment to prevention; and hospital to community. The Chancellor announced £10bn of investment in NHS technology and digital transformation projects by 2028/29 – representing a 50% rise in technology spend in 2025/26. This will primarily be invested in further development of the NHS App and improving patient experience across the NHS. Further announcements were made on investing in prevention initiatives, including £80m for tobacco cessation programmes and investment in employing mental health staff in schools. 

The NHS’ relatively generous settlement does not detract from the scale of the challenges facing trust leaders as they work with their dedicated teams to deliver on performance, maintain or improve quality and transform services.

The weeks ahead will be critical in determining whether the spending review settlement is deliverable, with the 10 Year Health Plan (10YHP) expected imminently and the outcomes of ballots from several trade unions threatening further industrial action. But whatever the outcome, we need to have an honest conversation about what the NHS can deliver now and in the future. 

The article first appeared in Public Sector Focus