Source · Select Committees · Public Accounts Committee
5th Report - NHS financial sustainability
Public Accounts Committee
HC 350
Published 29 January 2025
Recommendations
3
Accepted
Set out detailed plan for unprecedented NHS productivity gains, addressing staff retention.
Recommendation
NHSE displays a remarkable complacency about the realisation of future NHS productivity improvements, which, if achieved, would be unprecedented. According to official ONS measures, long-term productivity gains in the NHS averaged 0.6% a year over the period 1996–97 to 2018–19. …
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Government Response Summary
The government agrees, detailing actions including training over 20,000 NHS managers and clinicians, supporting the National Retention Programme, deploying Electronic Patient Record systems and the NHS App, shifting care to community settings, and aiming to save £1bn by 2029 through biosimilar medicines uptake. Additionally, providers received 2025-26 productivity packs, and future plans will follow the Spending Review.
HM Treasury
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4
Accepted
Review NHSE payment systems and processes to incentivise local systems supporting hard-to-reach patients.
Recommendation
In some cases, NHSE’s payment mechanisms can mean that local systems do not receive financial recognition when they prioritise hard-to-reach patients. GP surgeries receive a payment for every child vaccination. This vaccination funding mechanism favours areas where parents are more …
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Government Response Summary
The government agrees and states that NHS England regularly reviews and updates funding formulas, committing to do so again before 2026-27 allocations to ensure greater deprivation receives higher funding. It also cites existing programmes like Targeted Lung Health Checks and Mental Health Support Teams as evidence of reaching those most in need.
HM Treasury
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5
Deferred
Define government health prevention spending and increase flexible funding for local systems.
Recommendation
Given the constraints on public spending, it is highly likely that re- focusing attention from sickness to prevention cannot be achieved without re-allocating existing NHS funds in the same direction. Senior ICB leaders report a continued lack of progress with …
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Government Response Summary
The government is considering defining health prevention spending, deferring to the upcoming 10 Year Health Plan and Spending Review Phase 2. It notes that 2025-26 planning guidance has removed many ringfences for local flexibility and NHS England will soon publish a revised oversight framework.
HM Treasury
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Conclusions (23)
2
Conclusion
Accepted
Despite having last published a plan in January 2019, and the major disruption caused by Covid to the NHS since, DHSC and NHSE are yet to recognise the scale of transformation needed to make the NHS financially sustainable. The Government’s desire to publish a new 10- year plan is a …
Government Response Summary
The government welcomes the decision against capital-to-revenue switches and states record capital investment is agreed for 2025-26. It commits that every provider has been sent a bespoke pack for productivity opportunities for 2025-26, and a plan for 2026-27 will be set out after the Spending Review.
6
Conclusion
Deferred
NHSE’s long-held ambition to move more care from hospitals to the community has stalled. There would have been more investment and progress in mental health and community services, particularly GP surgeries and dental services, in 2023–24 had NHSE not redirected funding to prop up the day-to-day spending of local NHS …
Government Response Summary
The government is considering the recommendation, stating it will be addressed within the 10 Year Health Plan and multi-year Spending Review for decisions on shifting funding to community care. It highlights increased mental health spending in 2023-24 and the maintenance of Better Care Fund funding in 2025-26.
7
Conclusion
Rejected
Despite ambitions to improve productivity through the introduction of new technologies, the switch to digital in parts of the NHS has been glacially slow. Digital and technological improvements could have a transformative effect on the NHS. However, NHSE’s investment in technology over the period 2022–23 to 2024–25 stalled because funding …
Government Response Summary
The government disagrees with the recommendation, arguing against providers being 'fully paperless' due to digital inclusion considerations. It reports that 91% of secondary care trusts have Electronic Patient Records, forecast to reach 96% by March 2026, and fax machines will be unusable by 2027 due to analogue switch-off.
1
Conclusion
Deferred
On the basis of a report by the Comptroller and Auditor General, we took evidence from the Department of Health and Social Care (DHSC), NHS England (NHSE), and HM Treasury (HMT) on the financial management and financial sustainability of the NHS in England.1
Government Response Summary
The government states it is working with NHS England to publish planning guidance earlier and aims to improve the planning process for future years. It defers further consideration of this recommendation to the upcoming 10 Year Health Plan.
8
Conclusion
Accepted
DHSC also noted that 2024–25 had been especially complicated due to ‘external shocks’ and, in particular, very high rates of inflation which made budget-setting very unpredictable.11 It accepted that it was preferable to give longer for local systems to plan their budgets, but said there was a trade-off between how …
Government Response Summary
The government will work to enable planning guidance to be published well in advance of the financial year, and NHSE is working with ICBs to have full plans developed before the start of the 2025-26 financial year.
9
Conclusion
Accepted
We asked how local authorities and NHS bodies could be expected to work together and deliver a joint strategy when local authorities receive provisional budgets in December, and final ones by February, but NHS 8 C&AG’s Report, paras 1.6 and 1.8 9 C&AG’s Report, para 2.9 10 Q 57 11 …
Government Response Summary
The government agrees with the Committee’s recommendation and will continue to work together and with HM Treasury to improve the planning process and ensure timely publication of guidance to the system, and earlier agreement of priorities and financial allocations for future years, with a target implementation date of December 2025.
10
Conclusion
Acknowledged
NHSE received significant extra funding from the government during the course of 2023–24. This included £2.8 billion to support new pay deals for staff, and £1.7 billion to mitigate the impact of industrial action. Despite this extra money, NHS systems still finished the year with an aggregated £1.4 billion deficit, …
Government Response Summary
NHS England and DHSC continue to work together to enable planning guidance to be published well in advance of the start of the financial year, and ideally before Christmas.
11
Conclusion
Resilience to shocks is a key element of financial sustainability. We asked how well the NHS would cope financially in the event of another pandemic. NHSE expressed confidence that in the event of another pandemic government would provide any additional funding the NHS needed, as it had done during the …
12
Conclusion
Acknowledged
Demand for capital in the NHS continues to outstrip supply and the UK lags behind other OECD countries in terms of capital investment in its health system. DHSC has maintained its recent track record of not fully investing the capital funds HMT allocates it and instead reallocating large amounts for …
Government Response Summary
The government stated that the fiscal rules set out by the Chancellor at the Autumn Budget 2024 mean that no further capital-to-revenue transfers will be used, and the department welcomes this decision. In 2025-26, a budget of £13.6 billion for health capital investment has been agreed.
13
Conclusion
Acknowledged
DHSC and NHSE told us that they were fully supportive of the new government’s aims to shift healthcare spending from treatment towards prevention, from hospitals to the community, and from analogue to digital. However, DHSC contended that these shifts would be hard to do and should take place only over …
Government Response Summary
The government states that the financial position of NHS providers is significantly improved and that the 10 Year Health Plan will consider how to build a prevention-focused health system, shift the balance of care to community settings, and maximize the impact of digital technology.
14
Conclusion
Acknowledged
According to official ONS measures, long-term productivity gains in the NHS averaged 0.6% a year over the period 1996–97 to 2018–19. But productivity subsequently fell, both before and during the pandemic, and has yet to recover fully. In March 2024, the government announced that the NHS would receive £3.4 billion …
Government Response Summary
The NHS is working hard to recover lost productivity caused by the Covid-19 pandemic, NHS productivity continues to recover and to support this NHSE are focused on increasing clinical and operational productivity, improving staff retention, technology-enabled transformation, moving care to the right setting and improving prevention and maximizing the value of our spending.
15
Conclusion
Accepted
We asked witnesses why NHS productivity continues to be lower than before the pandemic. NHSE told us the NHS currently has 19% more staff compared to before the pandemic but is only seeing 14% more patients. It named several factors as contributing to the ongoing difference.24 NHSE highlighted that the …
Government Response Summary
The government states that the NHS is working to recover lost productivity, with recent data showing improvement and ongoing efforts focused on clinical productivity, workforce retention, technology, care setting optimization, and maximizing spending value; bespoke packs identifying opportunities have been sent to providers.
16
Conclusion
Acknowledged
We challenged NHSE on what it would do differently to achieve the ambitious annual productivity improvements it has committed to. NHSE told us annual productivity improvements were currently running at about 1.8% and it was confident that the annual gains that it has committed to of 2.0% could be achieved …
Government Response Summary
The NHS is working hard to recover lost productivity caused by the Covid-19 pandemic, NHS productivity continues to recover and to support this NHSE are focused on increasing clinical and operational productivity, improving staff retention, technology-enabled transformation, moving care to the right setting and improving prevention and maximizing the value of our spending.
17
Conclusion
Accepted
We asked about the equity of NHS funding mechanisms and the risk of perverse incentives, using as an example the distribution of money for childhood inoculations. GP surgeries receive a payment for every child that gets a vaccine.29 In our view, this funding mechanism favours wealthier areas where parents are …
Government Response Summary
The government states that NHS funding allocations already account for deprivation and health inequalities, and that NHSE regularly reviews the formula used to set allocations, noting evidence that NHSE investment is reaching those most in need.
18
Conclusion
Accepted
NHSE informed us that it relies on primary care networks working with their local ICBs to identify harder to reach cohorts. It accepted that local authorities often have better links into communities than NHS bodies. It said many lessons were learned from the COVID-19 vaccination campaign about where take up …
Government Response Summary
The government states that NHS funding allocations already account for deprivation and health inequalities, and that NHSE regularly reviews the formula used to set allocations, noting evidence that NHSE investment is reaching those most in need.
19
Conclusion
Deferred
DHSC described how the new government had set out three shifts that they want to see in the NHS: from analogue to digital; from treatment to prevention; and from acute to community. DHSC said that it wanted “to see those shifts over time, but not at the expense of patients …
Government Response Summary
The government is considering measures for supporting the prevention shift in the context of the work of the 10 Year Health Plan and does not wish to pre-empt the content, but will consider defining health prevention spend as an enabler and will notify the Committee of the response when it is confirmed.
20
Conclusion
Deferred
Senior ICB leaders reported to the National Audit Office a continued lack of progress with the government’s long-standing aim to move towards preventing ill health rather than treating it. One of the most important reasons cited by ICBs has been the focus on other pressing national priorities, particularly elective care …
Government Response Summary
The government states that measures for supporting the prevention shift are being considered in context of the work of the 10 Year Health Plan.
21
Conclusion
Deferred
DHSC told us it did not view providing more resources, or redirecting them from elsewhere, as a substantive part of the solution to the lack of progress with prevention. Instead, it considers that a shift towards prevention might be achieved through longer-term changes in culture, public attitudes and the legislative …
Government Response Summary
The government is considering measures for supporting the prevention shift in the context of the work of the 10 Year Health Plan and does not wish to pre-empt the content, but will consider defining health prevention spend as an enabler and will notify the Committee of the response when it is confirmed.
22
Conclusion
Deferred
Currently, NHSE does not even track spend and activity on prevention by ICBs at local levels, due to unavailability of data and the lack of consistency about what counts as prevention spending. While DHSC funds some prevention activities that sit outside the NHS, primarily through its Office for Health Improvement …
Government Response Summary
The government states that defining health prevention spend could enable a shift from sickness to prevention, and that this recommendation will be considered in the context of developing the 10 Year Health Plan.
23
Conclusion
Accepted
Local areas would value more flexibility about where they can direct their resources to achieve greatest impact, including how they fund measures to prevent ill health. ICBs were supposed to have greater autonomy in determining how to allocate resources locally compared to their predecessor bodies, including freedom to shape future …
Government Response Summary
The department and NHSE recently announced changes to the NHS operating model to move power from the health centre to local leaders. 2025-26 Operational Planning Guidance removed many ringfences, giving local systems greater control and flexibility over how funding is deployed to best meet the needs of their population. NHSE will soon publish a revised NHS oversight framework that will reward those ICBs and providers that are doing well with greater financial freedoms and flexibilities. ICSs already have a duty to base their integrated care strategies upon local joint strategic needs assessments.
24
Conclusion
Deferred
Despite carrying out 15% more elective activity than before the pandemic, the NHS is less productive overall once the activities of mental health trusts, community trusts and GPs are considered.42 NHSE told us that, while government has had a long-term aim to shift more care and services into local communities, …
Government Response Summary
NHSE, with DHSC, is focusing on enabling a greater shift from hospital to community – including considering how funding decisions over coming years can support this through the 10 Year Health Plan and the multi-year Spending Review. This recommendation is therefore under consideration and The Committee will be notified of the response when it is confirmed.
25
Conclusion
Accepted
NHSE assesses that sustained increases in capital investment are needed to replace ageing equipment, expand capacity to meet demand, and enable staff to benefit from new technologies.48 However, NHSE told us its investment in technology between 2022–23 and 2024–25 could have been greater had it been able to use underspend …
Government Response Summary
The government agrees that sustained increases in capital investment are needed, states that no further capital-to-revenue transfers will be used due to fiscal rules, and highlights that a record £13.6 billion has been agreed for capital investment in health for 2025-26.
26
Conclusion
Rejected
We asked what was being done to improve productivity through the use of new technologies. NHSE told us the NHS currently lacks a consistent data infrastructure and that NHS providers varied in terms of their levels of technological maturity.50 NHSE said that it was putting modern technology into some of …
Government Response Summary
The government disagrees that providers should be fully paperless, stating that some patient communications must be sent by letter and outlines investment in national IT systems, EPRs and the NHS app.