On the day briefing: Budget 2025

On 26 November 2025, Rt Hon Rachel Reeves MP presented her annual Budget in a speech to Parliament. This briefing outlines the key fiscal measures from the Budget from a health and social care perspective, as well as other key announcements. It also sets out the work NHS Providers has done to influence and gives our view on the measures introduced.  

If you have any comments or queries on this briefing, please contact our public affairs team.

Responding to the Budget, the chief executive of NHS Providers, Daniel Elkeles said:

"The Chancellor has opened a welcome new pathway for NHS capital investment which we’ve long called for. Investing in more new neighbourhood health centres will help the NHS to shift care from hospitals closer to where people live.

"The NHS is again central to the Budget although no extra money has been allocated specifically to help tackle waiting lists over the course of the current spending review period nor for a potential rise in the costs of medicines in any deal with the USA.  

"Nor is there any extra money to meet NHS staff pay rises above the 2.5% allowed for in the settlement from government, possibly not a realistic figure when welfare benefits and pensions are going up by around 4%.

"£300million more for new digital technology will go a long way to letting staff spend more time with patients rather than on time-consuming admin duties.

"And with more prevention of ill health a key ambition of the government’s 10-year health plan it’s great to see an extension of the tax on sugary drinks.

"Trusts work hard to make the most of every pound going into the NHS and are doing everything they can amid costly strikes – which put even more pressure on already strained budgets – and high demand to slash waiting times and see patients as quickly as possible.” 

Once again, the NHS was relatively front and centre of the chancellor’s Budget, with the government promising to double down on its commitment to reducing waiting lists. Despite this commitment, no additional money has been specifically allocated to help tackle waiting lists over the course of the current spending review period (to the end of 2028/29). 

The key announcements relevant to the NHS include £300m of additional capital investment in NHS technology – this is in addition to the £10bn of investment announced at the Spending Review earlier this year – and the construction/refurbishment of 250 new neighbourhood health centres. Given the fiscal challenges facing the chancellor, it is welcome that the departmental settlement set out at the Spending Review has been broadly protected. As announced earlier this month, it appears funding previously committed for the second half of the spending review period has been brought forward to support the immediate cost of redundancies at NHS England (NHSE) and integrated care boards (ICBs). However, broadly there is little change to the departmental settlement announced at the Spending Review. 

Trust leaders will welcome the clarity provided on the establishment of new neighbourhood health centres, and the commitment for 120 of these to be operational by 2030. Our joint report with PA Consulting called for government to make greater use of under-utilised assets across the NHS estate and we welcome steps taken in the Budget to refurbish facilities and co-locate services to improve access to care. It is welcome that the government are committing to using alternative finance models to support with the construction of new neighbourhood health centres. Given capital budgets are set to be held flat in real terms over the course of the current spending review period, public-private partnerships will offer an alternative route for the health service to access the capital required to deliver the vision set out in the 10-year health plan (10YHP). The NHS Neighbourhood Rebuild Programme will be an important yardstick to determine whether the lessons from previous Private Finance Initiative regimes have been learned to ensure projects represent good value for money, both now and in the future. We would encourage government to commit to reviewing the use of such schemes at an early stage to determine their viability, and should these be successful, consider expanding their use for larger schemes.  

To drive the shift from analogue to digital, £300m of additional capital investment to support the introduction and integration of new technologies across the health service could have a transformative effect on the health service’s ability to improve productivity. It is important that trusts from all sectors can benefit from the additional capital investment announced at today’s Budget. Trusts continue to make substantial progress on improving productivity and we have long outlined that capital investment, on both technology and infrastructure, is a key long-term enabler to sustained productivity growth. Capital budgets will now peak in 2029/30 at £15.2bn. 

Other important announcements include the government’s proposal to reduce the threshold at which the Soft Drinks Industry Levy (SDIL) applies and remove specific exemptions for milk-based products. This is an important step in driving the shift from treatment to prevention and will contribute to tackling a critical public health challenge. In addition, the government has increased the efficiency savings required across all public services to identify a further £4.9bn by 2030/31. The NHS, alongside defence, will automatically retain the proceeds of any additional efficiency savings identified, to be reinvested into frontline care.  

Media reports that the Office for Budget Responsibility (OBR) will adapt their forecasts for economic growth to include investment in the health sector are certainly promising. We have long advocated that government should view trusts as important vehicles for economic growth across their local communities. We encourage government to take a more holistic view of investment in the NHS, and the contribution trusts can make to support the government’s growth agenda.  

The OBR’s economic and fiscal outlook also highlights the pressure on the Department of Health and Social Care’s (DHSC) spending review settlement, estimating that July and November’s resident doctors’ strikes cost £0.5bn and identifying a risk of higher spending on drugs costing up to £0.7bn by 2028/29. The Budget announced today currently makes little accommodation for either of these pressures. Furthermore, given the possibility of further strikes, it may be somewhat unrealistic to assume that public sector pay growth will match government’s 2.5% assumption that has already been budgeted for within the current settlement. 

Following the end of the current spending review period, the OBR’s report also includes the assumption that total spending on the NHS will grow at 2.6% in real terms after 2028/29 – this is slightly higher than the 2.4% growth rate for DHSC revenue spending over the course of the current spending review period.  

We have worked closely with both NHSE and government departments leading policy development for the 2025 Budget. Our submission to HMT highlighted that the 2025 Budget should deliver a settlement for the NHS that: 

1. Shields frontline services from the financial impact of industrial action and increases to medicines prices, to ensure trusts can maximise the use of resources to recover care backlogs and improve performance.  
   
   
2. Provides short-term financial support to cover any unforeseen upfront costs (such as redundancy payments) associated with delivering financial plans this year and secure the NHS’s path to longer-term financial sustainability. 
   
   
3. Reforms the capital allocation regime to grant trusts greater flexibility to strategically invest in infrastructure projects that will improve productivity, modernise care and deliver better outcomes for patients – as outlined in our report: Investing in the NHS: empowering the sector to drive productivity, renewal and growth.
    
4. Develops a comprehensive capital strategy to ensure the NHS estate is well-equipped to tackle the challenges of the future. 
   
   
5. Sets out a realistic delivery ask for recovering care backlogs which balances improving access to care with a return to sustainable trust finances. 
   
   
6. Addresses the imbalance in resource allocations between mental health and physical health and reverses under-investment in community services to meet record levels of demand and continue to deliver safe, high-quality care to patients. 
   
   
7. Secures long-term funding streams to enable trusts to build new capacity, invest in the prevention of ill health and address health inequalities. 

Our long read on the 2025/26 financial reset outlined that delivering challenging financial plans this year will require consistent backing from government and national bodies, swift resolution of industrial disputes, funding for redundancy costs, and a less punitive financial control regime.  

Recently, we published a joint report with PA Consulting on reforming the NHS capital regime to improve access to vital capital funding to modernise outdated infrastructure and deliver the strategic transformation required to support the 10YHP. The report sets out a series of recommendations to strengthen NHS capital investment and unlock greater flexibility for trusts: 

• DHSC should design and publish a 10-year capital investment strategy to provide a framework for local prioritisation and decision making. 
  
  
• DHSC should set a trajectory to increase the capital share of health spending annually, with the long-term aim to dedicate 10% of the overall health budget to capital investment by 2035. 
  
  
• Increase capital freedoms for advanced foundation trusts to offer a powerful incentive for trusts to maximise the value of under-utilised assets. 
  
  
• Address the current policy challenges associated with IFRS16 and the capital departmental expenditure limit (CDEL) which are currently constraining trusts from entering into meaningful partnerships with local authorities or private investment. 
  
  
• Support the NHS to establish its own investment bank which could support carry-over investment and realise benefits over multiple years. 
  
  
• Expand the parameters of new public-private partnerships beyond primary and neighbourhood health infrastructure where larger schemes can demonstrate good value for money. 

Revenue funding

Broadly, the revenue settlement announced at the Spending Review in June remains relatively unchanged. However, as announced in recent weeks, funding from the second half of the spending review period has been brought forward to support the abolition of NHSE and redundancies across ICBs.  

In an effort to improve the productivity and efficiency of the NHS in England, the government has set a target of increasing NHS productivity by 2% per year, which is expected to unlock £17bn of savings over a three-year period. As set out in June 2025, a 30% reduction in agency staff spending by NHS trusts by the end of this financial year will build on the government’s target to eliminate the use of agency staff by the end of this parliamentary session. The abolition of NHSE, and the reduction in the headcount and running costs of integrated care boards (ICBs) is also expected to save £1bn by the end of the current parliamentary session in 2029.  

By the end of the spending review period, the resource departmental expenditure limit (RDEL) for DHSC will peak at £231.2bn. 

Capital funding

The Chancellor announced £300m of new capital investment for the rollout of new digital tools to support NHS staff with their work and boost productivity. Nominally, this has been added to the capital budget for 2027/28 and is in addition to the £10bn of NHS technology spend announced at the Spending Review in June. The Budget documentation outlines that this technology investment will provide staff with faster access to patient information and support patients to coordinate their care through the NHS App. 

The capital departmental expenditure limits (CDEL) for DHSC will peak in 2029/30 at £15.2bn.  

As part of the government’s new NHS Neighbourhood Rebuild programme, the Chancellor announced funding for the construction of 250 neighbourhood health centres, with early sites in Birmingham, Barrow-in-Furness, Hull, and Barnsley. These centres will form part of a new neighbourhood health service, which will bring a combination of GPs, nurses, dentists, and pharmacists under one roof in local communities across the country. The service is expected to focus on supporting those with complex needs and long-term conditions, such as diabetes and heart failure, but will eventually expand to support other priority cohorts.  

The first 120 of these neighbourhood health centres are due to be completed by 2030, with 50 built from the re-purposing of existing estate, and 70 new-builds which will be delivered through a combination of public private partnerships (PPPs) and public investment. A new PPP model is being developed by the National Infrastructure and Service Transformation Authority (NISTA). Those projects funded through PPPs will be budgeted for as if they were entirely publicly funded to ensure transparent management and fiscal sustainability.  

Other health and social care announcements

The chancellor confirmed the extension of the freeze on NHS prescription charges, with the single charge for prescriptions remaining at £9.90 for the second-year running – this is expected to save patients around £12m next year. The cost of prescription prepayment certificates (PPC) is set to also stay the same with 3-month PPCs remaining at £32.05, 12-month PPCs at £114.50, and the HRT PPC at £19.80. 

The Chancellor also announced that the soft drink industry levy (SDIL) will be extended to cover more high-sugar drinks, which will be inclusive of milk-based drinks, to support children to have a healthier start in life and tackle the obesity crisis. The threshold will be lowered from 5g to 4.5g of sugar per 100ml, with businesses given until 1 January 2028 to reduce the sugar levels in their drinks. The extension of the soft drinks levy is expected to deliver almost £1bn in health and economic benefits, with a projected £36m in savings for the NHS and a reduction in social care pressures by £30m.

Reclaiming proceeds from Covid-related fraud: Government has delivered nearly £400m of Covid fraud benefits to-date and will be pursuing more cases through the newly established Public Sector Fraud Enforcement Unit. 

Changes to health-related benefits: The health element of Universal Credit will be reduced for new claimants, with planned savings of £2.8bn in 2030/31. This will be combined with £1bn per year additional investment in employment support by 2029/30. The number of people who undergo face-to-face assessments to access health-related benefits will also increase. The Department for Work and Pensions (DWP) will also conduct an additional 122,000 work capability assessments for existing claimants by 2029/30 to ensure people are receiving the right level of support. A new independent investigation will be undertaken by the former health secretary, Alan Milburn, to tackle rising youth economic inactivity. 

Motability scheme: The government will limit tax breaks available to the Motability scheme which supports disabled people to access vehicles, and other qualifying schemes, saving more than £1bn over the next five years. From July 2026, new Motability leases will not benefit from VAT relief for top-up payments made to lease more expensive vehicles. 

Income tax and NI thresholds: The income tax personal allowance, the higher-rate threshold, and additional-rate threshold are frozen at £12,570, £50,270, and £125,140 respectively until the end of the 2030/31 financial year. There will also be further action to pursue those who try to bend or break tax rules, collecting more unpaid taxes and modernising the tax system. This brings the total additional revenue raised by reducing the tax gap to £10bn in 2029/30. 

Two-child benefit cap: As of April 2026, the two-child benefit cap will be lifted, costing £2.3bn in 2026-27, rising to £3bn in 2029/30, which the government estimates will reduce the number of children living in poverty by 450,000 by 2029/30. The government is also removing from statute the so-called “rape clause” which asks a mother to prove her child was conceived non-consensually before receiving certain government support.

Salary sacrifice arrangements for pension contributions: Tax-free salary sacrifices for pensions will be capped at £2,000 from 2029. Staff putting away any more than that will have to pay the standard national insurance rate of 8% if they earn under £50,000. Companies currently do not have to pay the 15% employer national insurance tax on money which goes into employees’ pensions.  

Updates to the national living wage: The government has accepted the recommendations made by the Low Pay Commission which will see the National Living Wage increase to £12.71 per hour from April 2026. 

Tobacco and Vapes Bill: The chancellor announced that she would be cracking down on illegal vapes, using the Tobacco and Vapes Bill to introduce a licensing scheme for retailers to be able to sell tobacco and vape products. The government is also legislating to introduce a Vaping Duty Stamps scheme from 1 October 2026, which will require all vaping products manufactured or imported into the UK to have a duty stamp on packaging, allowing people to more easily identify illicit products. 

• Budget 2025 – HM Treasury 
• Press release – HM Treasury 
• Budget 2025: submission from NHS Providers