Balancing act: supporting finance leaders to deliver on short- and long-term priorities 3
Introduction The context Meeting today’s challenges while building towards improved financial sustainability and
delivering better outcomes for people. The ask of the NHS today is clear – to improve quality and reduce costs so that each pound spent in the NHS delivers best value, outcomes and experience for patients, the population and NHS staff. However, the financial and operational challenges facing the NHS are well documented, and in-year cost control approaches challenge the flexibility required to deliver the more financially sustainable reforms required. In July 2024, the National Audit Office (NAO) report on NHS financial management 1 described a worsening underlying financial position due to issues such as a failure to invest in its estate, inflation, cost of post-pandemic recovery, industrial action, and increased sickness absence, as well as a decline in NHS productivity. The report also recognised that although the NHS delivered record levels of activity in many areas last year, performance is well below what patients should expect, and patients are waiting longer than they should for treatment. Lord Darzi’s review of the state of the NHS 2 in September 2024 assessed it to be in ‘serious trouble’, starved of capital and delivering unacceptable waiting times in a system too focused on acute care, making too little use of technology, and not paying enough attention to prevention. His diagnosis is intended to form the basis of a 10-year health plan 3 framed around three big shifts: moving from analogue to digital, hospitals to communities, and sickness to prevention. Although the overall financial position improved from the 2023/24 system deficit of £1.4bn to a 2024/25 forecast of £604m overspend at month 11 4 , the financial standing of the NHS is still at its most precarious in recent history. The first draft of integrated care system (ICS) financial plans for 2025/26 suggested a combined deficit of £6.6bn 5 .
Consequently, in March 2025, NHS England announced a ‘fundamental reset of the financial regime and accountability’, telling trust and integrated care board (ICB) leaders that there needed to be a major focus on the financial position and financial grip both immediately – for 2025/26 – and for the longer-term. Alongside this, leaders have called for systems to tackle unacceptable variation in quality 6 . As set out in the letter sent to all NHS chairs and chief executives on 1 April 7 , significant efforts have led to a much stronger position at the start of the financial year of £2.5bn deficit (before £2.2bn deficit support). However, there are major risks within the 2025/26 position including pay settlements and the requirement for material efficiency plans that need to be worked through to ensure they are turned into deliverable actions. The March 2025 NHS England performance update also recognised that although there have also been improvements in performance there is still a long way to go to meet targets. For example, in January 2025, 58.9% of elective referrals met the 18 week target compared to the constitutional standard of 92%. Other areas of particular challenge include long waits for mental health and community services, high numbers of people continuing to experience unacceptably long waits in emergency departments, and access to dentistry 8 .
1 National Audit Office, Financial management and sustainability , July 2024 2 Department of Health and Social Care, Independent investigation of the NHS in England , November 2024 3 Department of Health and Social Care and NHS England, NHS change , October 2024
4 NHS England, Financial performance update , March 2025 5 NHS England, Update on 2025/26 planning round , March 2025 6 HFMA, More ambition needed on productivity in financial reset , March 2025 7 NHS England, Working together in 2025/26 to lay the foundations for reform , April 2025 8 NHS England, Review of NHS performance and delivery: data annex , March 2025
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