On the day briefing: Spending Review 2025

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

“The NHS was front and centre in today’s spending round, underscoring its importance to the health of the nation and the economy. 

"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 and better services.

“Trust leaders also know the NHS must work differently if it is to create a health service fit for the future.

“They’re up for the challenge. That’s why they back the three shifts from hospital to communities, sickness to prevention, and analogue to digital.

“But politicians must give local leaders the freedom to lead. They know their communities inside out.

“And with an ambitious 10-year health plan to transform the NHS just weeks away from being unveiled and tough targets to improve access to care right now, trust leaders will ask whether the funding announced today enables the NHS to deliver everything being asked of it.

“We need to have an honest conversation about what the NHS can deliver now and in the future.  

“Trust leaders see other key public services coming under huge strain with less generous settlements, often leaving the NHS to deal with the fall out.

“Once again, social care – which is in desperate need of attention – hasn't been given the focus it needs. Leaving patients and the public without appropriate care is a significant blocker on progress for the NHS.  

“And while extra capital investment in NHS technology and digital transformation is long overdue, decades of under-investment mean we must think outside the box when it comes to solving this double whammy of under-strain public finances and an NHS estate in desperate need of renewal.

“It’s vital that all options are on the table, including exploring ways of bringing private capital back into the NHS which don’t replicate the costly mistakes of PFI.

“Making these shifts a reality will require upfront investment. The government – and the NHS – will face difficult decisions and tough trade-offs in the coming years.” 

The NHS has one of the most generous settlements in today’s Spending Review. The health service will see its revenue budget grow by 3% in real terms each year over the course of the spending review period to £232bn by 2028/29. For context, a 3% real terms rise in revenue budgets sits some way above average rises in health spending since 2010 (most notably the 2010-15 period where growth was consistently below 2%), however it still falls short of the long-term real terms average growth in health spending (3.7%).

The additional funding announced today comes with various strings attached. The NHS is being asked, once again, to go further and faster to improve productivity levels and deliver the best possible value for the taxpayer’s money. The Department of Health and Social Care (DHSC) has committed to delivering 5% efficiency savings over the course of the spending review period and the NHS has already been tasked by government to deliver 2% productivity growth each year, releasing £17bn, although the true efficiency ask will be much greater than that. As the results from our recent survey on the “financial reset” demonstrate, trust leaders are already doing all they can to reduce expenditure and improve productivity, including making difficult decisions over the course of this year on staff headcount and service provision.

There are a number of long-term enablers that will help to unlock further productivity growth in the NHS. The Spending Review today offered some hope for investment in these long-term enablers but also 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. Therefore, the government’s decision to hold capital budgets flat in real terms is short of the substantial investment needed to ensure the NHS estate is fit for the future. Today’s settlement will likely reinforce the concerns raised by trust leaders that there simply isn’t enough capital to go around, unless new forms of collaboration with the private sector can be identified.

While government recognises the significant challenges facing the adult social care sector, there was little update 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 continue to hold back trusts’ efforts to improve productivity, reduce waiting times and support patients to stay well at home.  

In more positive news, 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 (e.g. £80m for tobacco cessation programmes) and investment in employing mental health staff in schools.  

The relatively generous settlement the NHS has received does not detract from the scale of the challenge facing the health service as it seeks to deliver challenging performance targets at the same time as delivering significant reform. The weeks ahead will be critical in determining whether the settlement announced today is deliverable, with the 10-year health plan (10YHP) expected imminently and the outcomes of ballots from several trade unions concerning the 2025/26 pay settlements expected over the summer. 

Submission to HM Treasury 

Our submission to HM Treasury ahead of the Spending Review outlined how government and trust leaders can work in partnership to deliver their shared ambitions for the health service. The submission addressed two primary challenges necessary for building a future-ready NHS: improving productivity to ensure value for money, and implementing the three shifts to meet the evolving needs of the population. 

We focused on the key enablers that will transform the NHS into a health service that government, trusts, and patients can be proud of. Additionally, we emphasised how the provider sector is uniquely positioned to support the government's ambitions for the NHS. This submission was made on behalf of all trusts and foundation trusts in England, informed by extensive contact with trust leaders and NHS Providers surveys.

Pre-Spending Review influencing activity 

In the lead up to the Spending Review, we amplified the key points of our submission through engagement with government and via the media. In April, in anticipation of the Spending Review and the 10YHP,  we published a blog which advocated for targeted funding to address health inequalities and support the shift from treatment to prevention. In May, we published an op-ed on the financial incentives needed to support the shift from hospital to community.

Following the conclusion of planning for 2025/26, we also published the findings from our financial reset survey which outlined the measures trusts are having to take to meet financial plans this year. We secured over 650 media mentions, including online coverage by the BBC, PA Media (local, regional and national press), The Guardian, ITV (online), the Daily Telegraph, and The Independent. We also wrote to the Secretary of State to share the insights from our survey and invite him to work with trust leaders to identify potential solutions.  

To inform HM Treasury’s (HMT) thinking ahead of the Spending Review, we organised a roundtable bringing together Treasury officials with trust leaders. The discussion focused on how trusts can support the government’s mission to implement the three shifts and what support trusts need to return the NHS to financial sustainability. We also held regular meetings with leaders from DHSC, HMT and NHS England to reinforce our policy lines ahead of the Spending Review. 

This is a summary of the key relevant measures announced by the Chancellor, Rt Hon Rachel Reeves MP in today’s Spending Review.

Health and social care announcements

Revenue funding  

Over the spending review period from 2025/26 to 2028/29, the NHS will receive a 3.0% real terms growth in day-to-day spending, amounting to a £29bn increase in annual resource budgets. By the end of the spending review period, the resource departmental expenditure limit (RDEL) for DHSC will peak at £232bn.

DHSC has committed to delivering at least 5% savings and efficiencies over the spending review period, including £17bn in savings over three years by improving productivity by 2%. The NHS will also cut the need for temporary staff by capping agency spending and eliminating agency use for entry-level positions. This builds on the nearly £1bn reduction in agency spending achieved in 2024/25.  

Capital funding

Capital budgets will be held flat in real terms over the course of the spending review period, peaking at £14.8bn in 2028/29. The settlement builds on previous investments to improve the NHS estate and includes:

• Continuing the construction of 25 new hospitals through the New Hospitals Programme, replacing seven hospitals made entirely of Reinforced Autoclaved Aerated Concrete (RAAC).
• Allocating £30bn over the next five years for the maintenance and repair of NHS facilities, with over £5bn dedicated to the most critical repairs. This targeted investment aims to reduce serious infrastructure risks, halve the number of hospitals with RAAC, and eliminate RAAC from the NHS estate by 2035. 

Specific funding announcements

The Chancellor also announced a number of separate funding announcements, designed to support the delivery of the government’s three shifts: from analogue to digital; from treatment to prevention; and from hospital to community. These include:  

• £10bn of investment in NHS technology and digital transformation projects by 2028/29 – with specific investment for the NHS App and a single patient record system. 
• Further funding to support the training of more GPs and employing 8,500 additional mental health staff by the end of the spending review period.
• £80m for tobacco cessation programmes and enforcement to support the delivery of the Tobacco & Vapes Bill.
• £600m to launch the world’s first Health Data Research Service in Cambridge to accelerate the discovery of life-saving drugs.  

The Life Sciences Sector plan will also be published later this month to set out measures to boost the UK’s clinical trials offer, streamline regulation and encourage investment in new technologies.

Local government and social care spending

Government is increasing grant funding in real terms to local authorities by £800m (1.1% real terms growth) in 2028/29, compared with planned spend for 2025/26. Combined with a 3% core council tax referendum principle and a 2% adult social care precept, local authority spending power is expected to increase in real terms by 2.6%.

The government specifically acknowledged the significant challenges in the adult social care system and confirmed the first phase of Baroness Casey’s independent commission on reforming adult social care will report in 2026. The Spending Review has allocated over £4bn in additional funding for adult social care for 2028-29 compared to 2025-26. This includes an increase in the NHS' minimum contribution to adult social care through the Better Care Fund, aligned with DHSC's Spending Review settlement.  

The Chancellor also announced that the government would be supporting a fair pay agreement for the adult social care sector. However, further details of this have not been outlined in the Spending Review documentation. 

The government has announced £39bn for a new 10-year affordable homes programme, which will boost investment in social and affordable housing. The Local Authority Housing Fund will also receive £950m in capital investment, which is expected to increase the supply of quality temporary accommodation and reduce the use of costly hotels. 

The government has also confirmed that it will provide £4.8bn in financial transactions from 2026/27 to 2029/30 to catalyse additional private investment into house building. Spending on early intervention to prevent homelessness and rough sleeping has also been protected, and a further £100m, including from the Transformation Fund, has been provided.

Winter fuel payment and warm homes plan 

With the recent announcement that more than three-quarters of pensioners will receive winter fuel payments this year, the means test threshold will increase to £35,000 from 2025/26. This means that nine million pensioners will benefit from these payments from this winter.  

The government will utilise the Warm Homes Plan to improve energy efficiency and cut household bills. By committing a further £13.2bn between 2025/26 and 2029/30, this will support upgrading homes through insulation, heating and solar panels. The plan will support cutting household bills for families by up to £600 per year through installing heat pumps and other low-carbon technologies, and the government will work with the UK’s expert public finance institutions to support in the plan’s delivery.  

Children and young people 

The government will increase the core school budget by £2bn over the course of the next parliament, providing a £4.7bn cash increase per year by 2028-29. Through the government’s ‘School Rebuilding Programme’, £2.4bn per year will be provided to improve the school estate and rebuild over 500 schools. The Chancellor also confirmed the government’s promise to expand Free School Meals eligibility to all pupils in England where a parent is in receipt of Universal Credit. £370m will also be invested to support the delivery of school-based nurseries across England.

Mental health support teams are being expanded to cover 100% of schools in England by 2029/30. The Chancellor also set out support for reforming children’s social care, with £555m from the Transformation Fund for the Ministry of Housing, Communities and Local Government (MHCLG) and Department for Education (DfE), to help children to remain with their families. £560m between 2026/2027 and 2029/30 was also promised to refurbish and expand children’s homes and foster care placements. A Schools white paper is expected in the autumn, in which the government will set out its approach to reform of the current Special Educational Needs and Disabilities (SEND) system.

The Chancellor also focused on the importance of investing in skills. The government announced £1.2bn of investment per year by 2028/29, which includes funding to enable 1.3 million 16-19-year-olds to access high-quality training opportunities.  

Reforming the state 

For the first time in 18 years, this Spending Review has included a zero-based review of departmental spending, with a view to deliver at least 5% efficiency savings by 2028/29. The government will also seek to deliver a reduction in back-office costs and administrative budgets by at least 11% in real terms by 2028/29 and 16% by 2029/30, which will save an expected £2.2b in 2029/30. These targets have been agreed between government departments and the Office for Value for Money (OVfM) and are underpinned by delivery plans.  

The OVfM’s assessment of where to improve departmental efficiency amounts to around £14bn of annual efficiency gains by 2028/29 against planned day-to-day budgets for 2025/26. The government has already accepted the OVfM’s recommendation to introduce a programme of thematic value for money reviews in the years between spending reviews. The subjects for these thematic reviews will be announced in the autumn.  

Artificial Intelligence (AI) 

The government will publish its Modern Industrial Strategy later in June this year. This will set out how the government will accelerate growth in eight growth-driving sectors and strengthen economic resilience. These sectors are: advanced manufacturing, clean energy, creative industries, digital and technology, financial services, life sciences, and professional business services.

Life sciences is one of these eight sectors, and so this will mean up to £600 million invested from 2026/27 to 2029/30 in collaboration with the Department for Science, Innovation and Technology and the Wellcome Trust to launch the world’s first Health Data Research Service. This will accelerate discovery of life saving drugs. There will also be up to £520m life sciences manufacturing funding from 2025/26 to 2029/30 to build resilience for future health emergencies.

The Industrial Strategy will also lay out over £2bn to drive the AI Action Plan including a 20-fold increase in support for compute capacity, with £160m for TechFirst to ensure people have the right skills to deliver technological change.