By Amelia Sunkaraneni, Associate Director at Incisive Health
If Lord Darzi gave us the diagnosis – a health service in “critical condition” – then the Budget was the Government’s first opportunity to show that it has a serious treatment plan.
Day-to-day budget boost
On day-to-day (resource) funding, the Department of Health and Social Care (DHSC) was given an uplift of £22.6bn for 2025/26, compared to 2023/24 spending. This brings the total DHSC budget to £200.5bn (+3.4%) and the NHS budget to £192bn (+4.0%). Exactly how much will be available for new investments is unclear (and has led to calls for more transparent financial reporting) – for example, some of the money will need to fund previously agreed staff pay deals and there is confusion over the exact impact of the employer national insurance increase.
In the context of a challenging fiscal backdrop that has led to a 1.5% increase in Government spending across the board and some departments facing significant cuts, it is difficult to view the settlement as anything other than a win for the NHS.
No quick fix
However, for weeks now, there have been warnings that the money simply won’t be enough to meet the pledges that Labour made just months ago, due to the scale of existing pressures facing the service.
It is telling that the Government has focused its Budget comms on elective activity and reducing waiting lists – it seems likely that other manifesto commitments will be watered down or absent from the forthcoming priority list of objectives for delivery in the current Parliament.
While Labour has already sought to manage expectations on the pace of progress, a singular focus on electives is a big political risk. Results won’t be seen quickly (the extra 40,000 appointments a week may not be delivered until next summer) and there is no guarantee that the 18-week target will be hit any time soon (the Budget did not commit to a timeframe). With winter looming, the absence of targeted funding for urgent and emergency care will have the Government keeping everything crossed that the NHS comes through relatively unscathed.
Capital to boost productivity
It's a similarly mixed picture on capital funding. DHSC will receive a £3.1bn capital injection in 2025/26, again compared to 2023/24 spending, bringing its overall budget to £13.6bn (+10.9%). This includes £1.5bn for new surgical hubs and diagnostic scanners (although there was no reference to the manifesto commitment to double the number of scanners), alongside £70m for new radiotherapy machines, and £2bn for technology and digital.
In theory, this money should go a long way to supporting the NHS to make the substantial productivity gains needed to meet its operational demands (and which will have been demanded by the Treasury to agree the settlement). While the Government has set a 2% productivity, efficiency, and savings target for all departments, the reality is that some NHS trusts are already working towards targets far exceeding this – as high as 8%.
Maintenance backlog looms large
The elephant in the room is the ever-growing NHS maintenance backlog, which now stands at nearly £14bn. There have been reports of collapsing ceilings, overflowing sewage systems, and crumbling concrete. While £1bn was announced for essential repairs, realistically this will barely make a dent in the backlog – and this is all assuming that the Government can resist the temptation to raid the capital budget should immediate operational pressures become too great, something that became commonplace over the last decade.
Even with the right funding, the NHS has historically been hampered by an overcomplicated capital approvals process and capital expenditure limits set by the Treasury that cannot be exceeded even if funds are available. There have been repeated calls over the years for a shake-up of the NHS capital regime (remember the Hewitt review?) and these conversations will need to be revisited if the NHS is to make the most of every pound it has in the bank.
What's missing?
Beyond acute services, there was £26m to open new mental health crisis centres, £600m of new grant funding for social care, a commitment to establish a dedicated fund to upgrade GP surgeries, and a somewhat vague commitment to opening “new beds across the estate” – but none of this will be enough to drive true transformation. There was also a deafening silence on the public health grant, which is unfortunately becoming a Budget tradition.
All eyes on spring
The Budget demonstrates that Labour knows it will be judged on how much it has improved NHS performance at the next election. The increases in revenue and capital spending are intended to start to move the needle, but the big tests are yet to come with all eyes now on spring.
If the Government is going to deliver its “three big shifts in healthcare” – from hospital to community, analogue to digital, and sickness to prevention – then the 10 Year Health Plan and Spending Review 2025 have a lot of work to do. The Government still needs to define what ‘reform’ actually looks like in practice and set realistic long-term settlements for both the NHS and wider DHSC that are aligned to this vision.
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