On 18 June the prime minister set out the government’s plans to give the NHS a five-year funding increase on average worth 3.4% extra, in real terms, per year.

The settlement is significantly better than other public services have received, and with average growth of 3.4% per year (table 1). This is better than the trend in NHS funding for the past eight years: growth was 1.1% under the coalition government from 2010, and 2.3 per cent under the Conservatives from 2015 (Institute for Fiscal Studies and The Health Foundation, 2018). It means that from 2019/20 onwards, the NHS’ budget will more closely reflect the growing annual costs of providing good-quality healthcare than at any time since 2010.

 Table 1: NHS England budget growth to 2023/24








New budget (£bn)







Cash increase year on year (£bn)







Real terms increase







Previous allocation (at budget 2017)(£bn)







Cash increase on previous allocation (£bn)







*budget increase reflects additional money to fund Agenda for Change pay deal

The prime minister tasked the NHS with generating its own ten-year plan for spending this extra funding, plus any productivity and efficiency gains the NHS makes. The plan needs to set out how the service will balance spending between four different priorities (table 2).

Table 2


Desired outcomes


 Efficiency gains

 1. Recovering performance: Recovering the financial and performance gaps that have opened up after eight years of funding increases well below the long term NHS average.

2. Keeping up with rising costs and demand: Estimated to be an annual 3.3% in the NHS (Institute for Fiscal Studies and The Health Foundation, 2018).

3. Service transformation: Transforming the NHS, for example investing in IT and integrating health and care.

4. Enhanced commitments: Enhancing performance, for example in the areas highlighted by the prime minister and the heath and social care secretary such as improved mental health and cancer outcomes.


The purpose of this report is to open a debate on how the new money could be divided between recovery, transformation, keeping up with rising costs and improving outcomes for patients, by focusing on the costs of recovering the NHS’s position on performance and finance which is the first step.

It aims to aid decision making around establishing a realistic ask for the provider sector might look like by taking an honest look at the gaps which have opened up following eight years of restricted funding growth. Consecutive years of under-funding have left providers locked into a pattern of inevitable failure, with most trusts unable to deliver operational and financial targets no matter how hard they work. It is essential that this cycle is broken if the NHS is to retain public confidence, and if the financial rules underpinning, it is to become credible again. In order to do that, we must understand the likely costs associated with filling the gaps that have opened up in recent years.

From 2019/20 onwards, the NHS’ budget will more closely reflect the growing annual costs of providing good-quality healthcare than at any time since 2010.


Our work is designed to start a conversation about the scale and scope of the recovery challenge the NHS faces, rather than to provide a precise and definitive answer.

The analysis covers:

  • the need to recover NHS constitutional performance standards in the acute hospital sector and restore performance in the community, mental health and ambulance sectors
  • the costs associated with closing financial gaps in the provider sector such as revenue deficits, the reliance on one-off savings and under-investment in capital
  • the need to restore supporting budgets for staff development and public health
  • the likely cost to providers of increasing doctors’ pay.

Some of the costs are recurrent revenue commitments, while others are one-off costs. For the latter cases, we have profiled the costs across three years to reflect a realistic timescale for recovery.

This analysis is best read as a snapshot taken at the end of 2017/18, rather than dynamically modelled NHS performance and finances between 2019/20 and 2021/22. It describes the cost of recovering performance at the moment the decision to give the NHS more funding was taken.

The report is in three sections looking at:

  • recovering performance
  • recovering trust finances
  • other recovery required.