Dr Eleanor Roy, Policy Manager Health and Integration
The NHS planning guidance landed with fewer national priorities, more local flexibility and a relentless focus on performance recovery and living within means.
In recent years the NHS planning round has been no picnic, in fact for some it’s been painful. This year’s planning guidance landed under the shadow of a highly critical Public Accounts Committee (PAC) report. While it did not make it in time for Christmas, it has at least arrived a few weeks before the start of the financial year.
On first impressions the guidance is extensive, but there are hopeful signs. A simplified process of agreeing financial plans, a bonfire of national targets and suggestions of a more devolved system to come. However, there are also a few flies in the ointment.
The financial challenge remains
Even with additional funding from the Autumn Budget, 2025/26 will be ‘tougher than previous years’. There is around 2% real terms growth in the revenue budget, but it must cover final pay settlements, increased employer national insurance contributions and inflationary and recovery costs.
To meet national priorities, providers must reduce their cost base by 1% and improve productivity by 4% – and that’s before considering local demand pressures and non-recurrent savings from this year. For systems with deficits from previous years, repayment of non-recurrent support continues in 2025/26, as does the system of capital consequences and bonuses, adding further pressures on already struggling systems.
The messaging that 2025/26 marks a, ‘financial reset’ and the emphasis on, ‘all parts of the NHS living within their means’, reverberates. Systems must plan to remain within their allocations and grasp every opportunity to improve productivity and efficiency. Yet this may still not be enough. Difficult decisions to reduce or stop services might be necessary.
This is a huge ask in a few weeks. Especially as this year’s planning round forecast an overall deficit position of around £3bn and many systems are forecasting a deficit at the end of 2024/25. So, perhaps the simplified process won’t be quite as smooth as the guidance suggests?
Flags for devolution
The guidance sets the tone for a more devolved future. It increases local systems’ flexibility by reducing the number of national priorities and the amount of ring-fenced funding. Both the service development fund and additional elective recovery fund are rolled into baseline allocations. This means elective funding is capped, but changes to the payment system propose allowing Integrated Care Boards to control spend by setting payment limits for elective and activity-based services.
While greater flexibility and autonomy at a local level are welcome, it’s a mixed blessing. Systems will have to make those difficult decisions on reducing or stopping services. The guidance commits to backing local leaders, but a bumpy road may lie ahead for some.
Clues for the future
The guidance hints at what’s to come: baby steps towards neighbourhood health, pilots to test new payment mechanisms and the potential for provider involvement in service planning and transformation.
Overall, the guidance marks a move towards change but continues to fall short in understanding the financial challenges and their underlying causes. Aside from minor tweaks, it lacks specific focus, or investment in the government’s three shifts from analogue to digital, hospital to community and treatment to prevention. The 10-year plan and the spending review must address these challenges head on and do the heavy lifting to clarify how transformation will be achieved and funded.
Planning guidance and related documents can be found on NHS England’s website: NHS operational planning and contracting guidance.