Next day briefing: technical guidance to accompany the medium-term planning framework

NHS Providers is the membership organisation for the NHS hospital, mental health, community and ambulance services that treat patients and service users in the NHS. We help those NHS foundation trusts and trusts to deliver high-quality, patient-focused care by enabling them to learn from each other, acting as their public voice and helping shape the system in which they operate. NHS trusts in England collectively account for £132bn of annual expenditure and employ 1.4 million people.

On 24 October 2025, NHS England (NHSE) and the Department of Health and Social Care (DHSC) jointly published a Medium-Term Planning Framework, covering the financial years 2026/27 to 2028/29. Our briefing can be found here. Yesterday, NHSE published the technical guidance to assist with medium-term planning and financial allocations for the three-year planning period. This briefing highlights the key points that providers should be aware of.

Please contact Sandy Cook sandy.cook@nhsproviders.org and Sophie Heywood sophie.heywood@nhsproviders.org if you have any comments or questions.

We have engaged extensively with both the NHSE and DHSC teams leading policy work on the medium-term planning framework and accompanying technical guidance. Our on the day briefing following publication of the medium-term planning framework emphasised the work we have undertaken to represent members’ views to NHSE, DHSC and HM Treasury. We told them:

• The general direction of travel set out is the right one, but the operating context must be built into expectations.
• Many trust leaders have been increasingly frustrated by the annual planning process - single-year planning hampers efforts to tackle systemic longer-term challenges and reinforces focus on short-term savings rather than delivering longer-term productivity benefits.
• The NHS needs longer-term planning cycles and financial flows that properly incentivise the three shifts and sustainability.

We also:

• Published a joint report on capital with PA Consulting, underscoring the urgent need for reform to the NHS capital regime to support trusts to access sufficient capital investment to modernise outdated infrastructure and enable the strategic transformation required to the NHS estate to support delivery of the 10 Year Health Plan.
• Contributed regularly to the National Neighbourhood Health Implementation Programme (NNHIP)’s Neighbourhood Health Financial Flows working group.
• Engaged constructively with the relevant teams at NHSE in designing their proposed changes to the payment models for urgent and emergency care (UEC) and elective care.
• Continue to work closely with NHSE and DHSC to influence operating model reforms, including the strategic commissioning framework, advanced FT framework, model IHO and the model neighbourhood, ensuring there is clarity for providers.

The shift from annual planning and financial cycles to a three-year planning horizon represents a significant and positive change, one that trust leaders have long advocated for. Broadly, there is strong support for reforms to the NHS financial regime, particularly the move towards multi-year planning and a fairer funding allocation model. It is also welcome that, at the national level, funding will continue to grow in real terms and this growth has been baked into the financial allocations for 2026/27 and 2027/28.

Trust leaders will welcome the broad direction of travel but will continue to have key questions about the deliverability of such a significant re-wiring of the financial framework, given the challenging financial task they face this year, and in the years to come. It is vital that these reforms are introduced at a pace that avoids destabilising trust finances further and does not widen the gap between the highest-performing trusts and those experiencing significant challenges. This is especially critical when developing new payment models, deconstructing block contracts, and phasing out deficit support funding. Challenges will also remain in ensuring that the transition to a funding allocation model that more accurately reflects an area’s target “fair share” is delivered at the right pace.

While trusts have made notable progress on stabilising finances so far this year, delivering financial balance over each of the next three years and 2% year-on-year productivity growth will be a significant challenge. It is vital that government and national bodies recognise the difficult balance trusts leaders will have to manage in delivering the financial ask, while simultaneously improving performance against constitutional standards, reducing waiting times, improving the quality of care patients receive and meaningfully engaging in delivering the vision set out in the 10 Year Health Plan. As we have seen this year, there will need to be some trade-offs in delivering a stretching set of asks.

It is notable that the majority of the work to enable the shifting of resources from hospital-based care to community-based care is still to come. The primary focus of the payment reforms introduced for 2026/27 are centred around the introduction of a welcome new payment model for urgent and emergency care. While it is promising that there is a commitment from NHSE to explore further payment reforms for mental health and community services and to support the move to a neighbourhood model of care, it is notable that there is little change thus far that will meaningfully support the shifting of resources from hospital to community.

It is disappointing that the Mental Health Investment Standard (MHIS) is to be watered down. While ICBs must meet the MHIS over the course of the planning period, it will be deeply frustrating to mental health trust leaders that values will be based on flat real terms growth, rather than real terms increases. The initial purpose of the MHIS was to support faster spending growth for mental health services to close the funding gap between mental and physical health services, and the MHIS for 2026/27 will not meet this ambition. We would value engaging with national bodies on how the MHIS, or an alternative, can be designed to ensure mental health services receive sufficient funding growth to manage existing, and future, levels of demand.

Trust leaders will welcome many of the proposed reforms to the NHS capital regime, which has long been described as dysfunctional and not fit for purpose. Many trusts will welcome the devolution of capital allocations to provider level and the long-term certainty this will provide them. It will be important to see how the new capital allocation formula works in practice, and it is imperative that trusts, of all sizes and from all sectors, have sufficient access to the capital funding they need to ensure their estates are fit for purpose.

We welcome the freedoms and flexibilities offered to trusts in NOF segments one and two – as well as advanced foundation trusts. This will be an important step towards providing high-performing trusts with greater autonomy to reinvest surpluses into capital projects that will deliver further benefits to patients. However, given the current financial challenges trusts are facing, the ability for any trust to deliver a surplus will be extremely challenging.

Following the publication of the medium-term planning framework, NHSE has also published the revenue finance and contracting guidance for 2026/27. In accordance with the overall framing of the medium-term planning framework, ICBs and trusts must submit aligned, organisation-level financial plans for the next three financial years (2026/27, 2027/28 and 2028/29). Both ICBs and trusts – as individual bodies – are required to maintain a break-even position across each financial year and plans must be agreed by relevant boards before being submitted to NHS England. Therefore, the requirement for trusts and ICBs to exercise their functions with a view to meeting the system breakeven duty is removed from 1 April 2026.

As outlined in the 10 Year Health Plan (10YHP), ICB allocations will move towards their “fair share” over the current planning period (e.g. by the end of 2028/29) and deficit support funding will also be removed. NHS England will set every ICB and trust a revenue financial plan limit for each planning year. Where organisations have a deficit plan limit, non-recurrent deficit support funding will be made available to support organisations to a breakeven position. The deficit support funding will be reduced over the period with all organisations expected to breakeven without deficit support funding by the end of the planning period (March 2029).

NHSE will also publish new finance business rules guidance, which will apply from 1 April 2026. These will support the new NHS operating model and enable organisations to be able to develop medium-term plans. The updated business rules will clarify how cumulative system positions will be carried forward into 2026/27. ICB repayments of cumulative system deficits will be paused in 2026/27 and 2027/28 to support the transition to the new NHS operating model. Where ICBs deliver breakeven revenue positions in both 2026/27 and 2027/28, NHS England will consider wiping historical cumulative system deficits.

NHSE has set ICB revenue allocations for 2026/27 to 2027/28, covering core programme spend, specialised services, primary care, ophthalmic and dental (POD) services and the ICB running cost allowance. ICB allocations for 2026/27 can be considered as final, with allocations for 2027/28 to be considered as indicative to support planning. Allocations for 2028/29 are yet to be provided. Allocations aim to move toward ‘fair share’ targets through convergence and baseline adjustments. A baseline adjustment will be applied to some ICB core programme and specialised allocations where ICB allocations are under target by more than 2.5% and the ICB or trusts are separately receiving deficit support funding.

ICB recurrent baseline allocations will be adjusted to include recurrent elective recovery funding based on a target “fair share” distribution. The guidance confirms that further elective recovery funding will be made available to commissioners as an additional non-recurrent adjustment but may be subject to clawback should the required performance improvements not be delivered. The allocations also indicate that funding for activity growth will also be available for ambulance services and primary care.

NHSE have also increased the current £19 per head of population ICB cost of commissioning limit to reflect the pay assumptions made for planning and the impact of other pay-related cost pressures. The limit will rise to £19.40 in 2026/27, £19.80 in 2027/28 and £20.21 in 2028/29. The allocations for 2026/27 indicate that this will release c. £1bn of savings.

ICBs must meet the Mental Health Investment Standard (MHIS) for both core programme and specialised services allocations from 2026/27 to 2028/29. ICB core programme MHIS values will be set for 2026/27 to 2028/29 based on flat real funding growth.

NHS trusts must continue to reduce agency and bank staffing costs, with annual limits set for 2026/27 to 2028/29 and monitored at trust level. In line with 10YHP aims, agency spending must fall to zero by 2029/30, while bank spending will reduce by 7.5%–15% each year based on current levels.

NHSE will set annual cash drawdown limits for ICBs. Trusts are expected to manage cash efficiently, with revenue support via public dividend capital (PDC) available only in exceptional circumstances under DHSC guidance.

As announced in the 10YHP, the Better Care Fund (BCF) is to be reformed and refocused on integrated services – further details on the approach to this reform will be set out by DHSC in due course. For 2026/27, the minimum contribution made by ICBs to the BCF will increase by an average of 3%, rising to 3.2% growth in 2027/28. The minimum NHS contribution to adult social care will increase by 4.4% in 2026/27, rising to 4.8% growth in 2027/28. This is faster than the rate total ICB allocations are growing over the same period.

The Clinical Negligence Scheme for Trusts (CNST) contributions charged by NHS Resolution will increase by 8% overall in 2026/27. However, specific charges for each trust and ICB will vary and will be provided to each organisation separately to inform planning submissions.

The Spending Review 2025 and the 10YHP set out major NHS capital reforms, including a four-year settlement to 2029/30 and long-term estates maintenance funding to enable strategic investment. The capital guidance 2026/27 to 2029/30 sets out a number of significant changes to the NHS capital regime:

• Multi-year operational capital envelopes (to 2029/30) allocated directly to providers, alongside indicative assumptions for a further five years (to 2034/35);
• Giving NHS regions a lead role in strategic estates planning and delivery oversight;
• Expanded capital freedoms and flexibilities, including greater delegated authority and the ability for high-performing providers and newly authorised foundation trusts to reinvest surpluses;
• Streamlined approvals and higher delegated limits, with HM Treasury approval required only for schemes above £300m, and no further approval required at Full Business Case (FBC) stage unless total costs exceed £1bn or there are material changes to the scope of the scheme.

The capital settlement for 2026/27 will be split into three broad categories

• £4bn for provider operational capital and ICB allocations (e.g. day-to-day operational investments, maintenance renewal and replacement of plant, IT and equipment)
• £2.6bn for nationally allocated funds to support major programmes (e.g. major national projects including the New Hospital Programme (£1bn for 2026/27), the RAAC eradication scheme (£432m for 2026/27) and ringfenced technology and productivity programme (£900m for 2026/27))
• £3bn for other national capital programme investments (e.g. delivery of constitutional standards and wider reform priorities – including the Estates Safety Fund and neighbourhood health centres)

As outlined above, the capital guidance confirms that operational capital allocations will flow directly to individual providers rather than via integrated care boards. Allocations will be determined via a formula comprising 85% depreciation (used as a proxy for asset base scale) and 15% critical infrastructure risk (used as a proxy for condition of the asset base). The new formula will also deduct depreciation on PFI assets instead of PFI repayments, for a fairer distribution of capital funding that still ensures that funding is not provided for PFI assets whose maintenance costs are paid for via the unitary charge. The capital guidance outlines that following these changes and, given the overall rise in depreciation in recent years, it is no longer affordable to fund depreciation pound-for-pound. NHSE allege that the new model will deliver a fairer distribution of capital across providers.

Total operational capital is set to be maintained in real terms over the Spending Review period. The guidance also confirms 5% of the funding available each year will be redirected from provider operational capital into ICB allocations, to help maintain the ICB-held asset base and support hospital-to-community initiatives aligned with the 10YHP.

The capital guidance outlines that from 2026/27, all providers in NHS Oversight Framework (NOF) segments one and two will continue to be able to deploy their prior-year surpluses as additional CDEL in either the current or subsequent financial year. The threshold for national approval of business cases for NOF one and two trusts will be £100m. Freedoms will not be cash-backed and providers cannot access PDC to fund any capital expenditure linked to these flexibilities. Further capital freedoms and flexibilities for advanced foundation trusts are also currently under consultation and these expanded freedoms will continue to operate within the existing statutory framework, until wider legislative changes are enacted.

The proposals for the 2026/27 NHSPS focus predominantly on developing a new payment approach for urgent and emergency care and introducing a number of additional best practice tariffs (BPTs). NHSE are also considering whether there needs to be any further changes to the 26/27 NHSPS to support the medium-term planning framework’s commitment to reduce the number of routine, clinically low-value follow-up appointments.

NHSE has proposed the following changes to the NHSPS for 2026/27 through the consultation running until 16 December 2025:

• The cost uplift factor will be set at 2.03% and for non-pay non-drugs inflation the NHSPS is proposing to use DHSC forecasts instead of the Office for Budget Responsibility (OBR) forecasts.
• The efficiency factor will be set at 2% to mirror the 2% productivity target set by the 10YHP.
• Reviewed and updated list of high cost drugs and devices for 2026/27 that are to be excluded from NHSPS price calculation and reimbursement.
• Introducing and expanding the scope of BPTs:
  • Broadening the classification of activity BPTs to cover both UEC and elective services – this would include introducing a number of new BPTs related to UEC.
  • Increase the number of procedures covered by the “right procedure, right place” BPT to encourage more procedures to move out of traditional operating theatres and into alternative settings.
  • Adding 22 Healthcare Resource Groups (HRGs) to a new list of day case BPTs.
  • Introducing 10YHP Referral to Treatment (RTT) BPTs for services typically undertaken in one-stop clinics.
• Introducing a new unit price for patient-not-present (PNP) activity which would result in the stopping of an RTT clock.
• In setting fixed payments for 2026/27, funding for individual services should be identified and used as a baseline to inform contracts for 2026/27. Commissioners and providers should agree adjustments to 2026/27 fixed payment values for agreed funding differences of up to +/- 2.5% of total contract values, such that those funding differences are reduced.
• Elective activity will be paid for entirely on a variable basis using NHSPS unit prices.
• UEC activity will be paid for using a blended payment model, comprising a fixed payment (NHSPS prices x planned activity) and a variable payment (of 20% of NHSPS prices) for activity above or below plan. There will be a ‘break glass’ clause should activity significantly differ to plan

Although the medium-term planning framework has asked both trusts and systems to plan over a three-year period, NHSE have proposed setting the NHSPS for 2026/27 only in order to develop further proposals to be implemented from 2027/28 and beyond. NHSE have also confirmed that work will continue to develop new payment approaches for mental health and community services. NHSE have identified the following three areas where they are currently developing proposals for 2027/28:

• Recalculating prices to use more recent cost and activity data.
• Using payment mechanisms that help empower patient voice.
• Developing payment models which can support the provision of neighbourhood health services.

NHSE has also launched the consultation on proposed changes to the 2026/27 standard contract. As for the NHS payment scheme consultation, the deadline for responding to the online survey is 16 December 2025.

The proposed changes to the standard contract for 2026/27 centre around the following themes:

• Updating the standard contract to reflect national quality requirements (e.g. access and waiting time standards) and to require commissioners to include any targets agreed as part of local planning.
• Adding a small number of updates to reflect national priorities and guidance (e.g. requirement to implement the three core components of Martha’s Rule by 31 March 2027).
• Update Schedule 6C on Service Development and Improvement Plans and add a suggested new Data Quality Improvement Plan.
• Update the Contract with proposed changes on safeguarding, procurement, energy, and estates matters as well as factoring in changes announced as part of the 2026/27 NHSPS.
• Removing the escalation process from the Contract in regard to activity management provisions, but strengthen the requirement for commissioners to comply with NHSE’s technical guidance when managing activity funded on a variable basis.

• Medium term planning framework
• On the day briefing: Medium term planning framework 2026-2029 
• Revenue finance and contracting guidance for 2026/27 to 2028/29 
• Capital guidance 2026/27 to 2029/30 
• 2026/27 NHS Payment Scheme consultation 
• 2026/27 NHS Standard Contract technical guidance 
• Financial allocations