Financial pressures put NHS progress at risk

Trusts’ finances are under pressure as never before. For all their efforts to stay on track, there is still significant risk baked into their financial plans, with NHS England estimating this could be as large as £1.5bn. Trusts need support from government to deal with these pressures, so they can focus on delivering the commitments set out in the 10-year health plan. 

Strikes 

In July 2025, resident doctors staged a five-day strike over pay and working conditions, despite the government agreeing to a 5.4% rise for this staff group – the largest public sector pay award for 2025/26. There may be more to come: other unions have also rejected their settlements and threatened further action. 

Strikes cause very significant financial costs in addition to the obvious impact on patients. Trusts have to recruit temporary cover to fill rota gaps, often at premium rates. In previous rounds of industrial action, disruption to planned care resulted in lost income to trusts where payment was linked to activity. Trust leaders have also told us that planning for strike action eats up management time, diverting attention from operational priorities and delivering savings targets. 

Further strikes would undermine trusts’ ability to meet financial plans and cut waiting lists this year. Trust leaders want to see a solution that avoids further disruption to patients. More than 80% of respondents to our April 2025 survey supported government introducing a national overtime rate to help reduce strike-related costs. This would mitigate some of the financial risk associated with ongoing disputes, as the current process of negotiating overtime rates locally leads to unhelpful competition for staff and significant variation in strike-related costs.

Redundancy costs 

Trusts are making tough decisions this year to reduce spending on staff pay to meet financial plans, including cuts to clinical posts. While these cuts should improve long-term productivity and sustainably save money there will inevitably be up-front costs, such as redundancy payments, that will impact this year’s budget. These immediate costs risk derailing financial plans and may halt headcount reductions this year if they are not immediately affordable. 

Trust leaders tell us that without financial support for in-year redundancy costs, they risk either missing efficiency savings targets and ending the year in deficit, or having to make deeper cuts elsewhere to make up the shortfall. 

Clear priorities

The British Social Attitudes survey, published in April 2025, revealed a steep fall in public satisfaction with the NHS. Trust leaders are working hard to rebuild public confidence by reducing care backlogs, improving patient experience, and delivering high-quality care. On planned hospital treatment, many tell us they could do more procedures than they are funded for at ordinary tariff rates – supporting this would ease trusts’ financial pressures and improve their elective performance.

Trusts recognise that the NHS’ need to live within its budget will sometimes lead to unpopular decisions, such as moving care from local facilities or cutting treatments that offer lower value for money. However, trust leaders currently feel that the government could do more to support them to make these decisions. They want help in communicating that tough calls on staff headcount and service provision are the right things to do and will deliver long-term benefits for the health service and everyone who uses it.

Support to improve productivity

There is little doubt that NHS productivity was significantly damaged by the pandemic. Trusts are doing all they can to address this, as reflected in the most recent productivity data provided by NHSE.  In recent years, trusts have significantly cut spending on agency staffing (an estimated 38% reduction over two years); improved care and cut costs by delivering more procedures with same-day discharge; and reduced the average length of stay for overnight non-elective admissions. 

However, to go further and faster on improving productivity, government must work with trusts to harness the power of digital technology, including artificial intelligence (AI), which offers the potential of  widening access to care, enhancing the experience of patients and, crucially, improving productivity. The government’s £10bn investment in NHS technology announced at the Spending Review in June 2025 was welcome, but given that vital digital transformation budgets have been continually raided in recent years, it is important this is protected and supports trusts to digitise at pace. They need a programme to industrialise the use of AI to ease cost pressures and speed up care.

Trust leaders are keen to focus on delivering the longer-term strategic change set out in the 10-year health plan, but they face a strong headwind because of severe short-term financial pressures. Targeted support can help ensure that the “financial reset” puts the NHS’ finances on a secure footing, while working towards its ambitious long-term goals. 

This article was first published in Public Finance