NHS leaders in England braced for 2% spending settlement

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Health service leaders in England are braced for chancellor Rachel Reeves to increase day-to-day NHS spending in real terms by about just 2 per cent in the Spending Review next month.

In the October Budget, day-to-day health spending for 2025-26 was increased in real terms by 3.8 per cent. However, the sector is preparing for a less generous funding boost over the next three years. 

“We’re expecting the CSR [comprehensive spending review] settlement to be bad for public services including for the NHS, around 2 per cent,” said one health official.

“That’s what we are being led to believe and can’t see any other outcome, given the government has boxed itself in with no tax rises and they can’t increase government borrowing.”

Another senior health official said “circa 2 per cent is what everyone is expecting”. A third person close to the discussions said the sector was being warned of a planned increase of “around 2 per cent” after inflation. 

The Department of Health and Social Care said: “This is pure speculation. This government has already backed our NHS, investing £26bn to help rebuild our broken health system.

“Investment must go hand in hand with reform, which is why we are cutting red tape by halving the number of national targets and empowering local leaders to focus on delivering for patients.”

A government official said negotiations were continuing but that it was “fair” to say the sector would not be receiving the 6-7 per cent settlements seen under the last Labour government.

Ministers use spending reviews to decide how to allocate funding between government departments. The last multiyear spending review was in 2021, when then Conservative chancellor Rishi Sunak set apportioned money for three years. 

The CSR period to be set out by Reeves on June 11 will cover the 2026-27, 2027-28 and 2028-29 financial years. 

Health leaders warned after the October Budget that the settlement was just enough to keep the struggling service standing still.

“We are being led to believe there will be an increase of 2 per cent each year, but sometimes they will have different percentages across the three year period”, a health official said of the CSR. 

Noting that the last year of the CSR would fall just ahead of the next election, which must be held by summer 2029, they added: “I wouldn’t be surprised if spending increases then so that they [ministers] can say they are increasing NHS funding when they go to the polls.”

Work is under way on the government’s draft 10-year plan for the NHS in England, expected in late spring.

But the precarious state of NHS finances, with organisations predicting significant overspending during this next financial year, may limit leaders’ ability to deliver on targets to boost productivity and cut the 7.42mn appointments backlog.

Sir James Mackey, interim chief executive of NHS England, the arm’s-length body that runs the health service but is being abolished, warned this month that the government was “pretty much maxed out on what’s affordable”. 

“It is really now about delivering better value for money, getting more change, delivering on getting back to reasonable productivity levels,” he told reporters at the Medical Journalists’ Association. 

“In the end, it will be about how we get better value for money for the money that we’ve got. And we’ll get some growth in the spending review, but it’s never enough.”

In March, NHS England told health leaders to expect a “fundamental reset” to local health services’ financial regimes and “accountability”.

Sebastian Rees, who leads health policy at the Institute for Public Policy Research think-tank, said the overall size of the health budget meant “even modest real term increases have a major effect on government spending as a whole”. 

“Given high levels of economic uncertainty ahead . . . expectations that health spending will grow at the pace it did under the last Labour governments are not realistic.”