Image © Techa Tungateja/iStock
Reprofiling for redundancies
Nine months on from the announcement of the abolition of NHS England, and the demand for Integrated Care Boards to cut their running costs by 50%, the Budget finally confirms arrangements to pay for the associated redundancies. You’ll note I use the word ‘arrangements’ rather than ‘funding’, as this is a slightly unusual turn of events.
In line with the ‘no funding without reform’ theme, the Department for Health and Social Care has been given permission to ‘reprofile’ its revenue settlement across the spending review period. This means funding from future years will be pulled forward to cover the cost of redundancies.
In practice, DHSC can ‘overspend’ by £430m in both 2025-26 and 2026-27. The hope is that this restructuring yields savings of around £1bn per year, which can then be used to replace the reprofiled spending in later years – with a revenue reduction of £60m in 2027-28 and a larger £800m reduction in 2028-29.
This reprofiling is risky on a number of levels. Firstly, it frontloads the revenue settlement. Secondly, the success of this restructuring is completely dependent on the expected savings being realised, enabling the reprofiling to be repaid in later years. Thirdly, it means that the timing of redundancies is critical, with half needing to take place before the end of the current financial year. This will likely be based on the hope the ICB redundancies can be made in 2025-26, with the focus on NHS England and DHSC in 2026-27, when the NHS Reform Bill (and perhaps a clearer plan) emerges. It‘s worth noting that the Public Accounts Committee is not confident on this front. A few days before the Budget, it highlighted the lack of a clear plan, impact assessment and funding – comparing the restructure with HS2.
So, a few weeks before the festive period, amid the planning round, ICBs are launching their voluntary redundancy schemes. Even if all goes to plan, the timeline for these schemes is tight; approvals are expected in January and exits in March 2026. But the voluntary redundancy scheme agreed with the Treasury has been referred to as “the toughest ever sought”, largely due to claw-back arrangements and tax implications. So, there are questions on how attractive it will be, as many staff may hold out for compulsory redundancy. If the timing or savings don’t go to plan, then this reprofiling exercise is going to need revisiting.
£300m capital investment in NHS technology
The one clear allocation for the NHS in the Budget was £300m capital for NHS technology, on top of the £10bn announced in the Spending Review. What this allocation is actually for remains vague, with the Budget document hinting at boosting productivity, supporting staff and improving outcomes. But what it clearly signals is the commitment to invest in the analogue to digital shift, and the hope that technology will be the answer to many of the NHS’ challenges.
A new model of investment for neighbourhood centres
Like many of the budget announcements, a new model of public private partnership for neighbourhood health centres (NHCs) had already been trailed to support the shift from hospital to community.
The budget confirmed that the NHS Neighbourhood Rebuild Programme is intended to deliver 250 NHCs, with 120 to be operational by 2030. Of these, 50 will be upgrades or refurbishments of existing facilities using public money (largely from the utilisation and modernisation fund, as detailed in recent capital guidance). The remaining 70 NHCs are expected to be new builds funded via a mix of private and public finance on an 80:20 split.
The new model of PPP is still being developed but is intended to embed the lessons of the past and harness private sector expertise. What is clear from the outset is that these projects will be on-balance sheets. CIPFA’s Exploring challenges and solutions for the NHS estate, called for new models of investment, so this is welcome. But the report also highlighted that the NHS could lack credibility as a partner in such collaborations. While moves towards multi-year capital settlements and simplifying the capital regime (again, detailed in capital guidance) may help with this perception, we encourage NISTA and DHSC to consider our findings when developing the new model of PPP. In particular the need to:
harness learning from across government, the devolved nations and international examples to enable broader sharing of best practice, and
review the support, resources and skills required in NHS organisations to ensure they are equipped to support planning and delivery – especially in relation to contract management to secure outcomes and value for money.
The bigger picture
The budget shows average real growth in DHSC revenue of 2.4% over the Spending Review period. This is slightly down from 2.8% in June, likely reflecting changes in the OBR’s projections. Yet, this is barely enough to keep up with the existing cost pressures of higher demand, demographic pressures, pay growth, and the priority to reduce waiting lists (estimated to be around £34bn by the Health Foundation).
The OBR's forecast recognised further risks to NHS spending posed by industrial action and negotiations over NHS spending on medicines.
As I’m writing this, I’m watching headlines appear realising both these risks. Notably, a further five-day strike by resident doctors in December and a likely 25% increase in NHS drug spending following the US trade deal negotiations. This means that only days after the budget there is already around £3.5bn in additional pressure – and there may be further strikes to come.
Another significant grey area is the actual cost of delivering the 10 Year Health Plan and how this has been factored into the settlement. Alongside the Budget, the Office for Value for Money report commits to a VFM review across selected areas of government spending ahead of the next spending review. One of these areas will be new models of care within the NHS and communities as part of the 10YHP. This means at least one small part of the 10YHP should receive some scrutiny.
Given the announcements in the budget on redundancies and investment in technology and infrastructure – there is perhaps also a risk that these collide. Delivering NHS infrastructure and digital transformation are challenging (as highlighted repeatedly by NAO and PAC in recent years). These initiatives also rely on appropriate specialist expertise.
But the pressure for organisational reform seems more immediate, if we are to meet the timescales and savings set out above. Let’s hope that this does not ‘reform’ the very expertise required out the door, risking both investments, the outcomes they are intended to deliver and the savings because of restructuring.
