The NHS won a record rise in funding in yesterday’s Budget speech, but experts are warning that patients are ‘unlikely to notice’ as the cash is swallowed by urgent building repairs, staff pay rises, and continuing inefficiencies.

In her first speech as the new Chancellor, Rachel Reeves awarded the NHS an additional £22.6bn for routine spending, spread over this year and next, and a further £3.1bn in capital spending for extra beds and improvements to buildings, describing it as ‘the largest real-terms growth in day-to-day NHS spending outside of COVID since 2010’.

But leading health think tanks warned the money will merely ‘help sustain services’ rather than bring any lasting improvements for patients.

Key points for health and social care

In her Budget, Reeves announced:

• A £22bn increase in total health and social care revenue and capital funding as part of a two-phased Spending Review.
• NHS England’s ring-fenced revenue budget will increase by 4.7% this year to £181.4bn and then another 3.3% next year to £192bn. The overall health and care budget, from which NHS England may be given further money take forward activity such as bringing down elective waiting lists, will increase by a smaller 3.8% and 3% respectively
• £1.5bn to fund new surgical hubs which will help build capacity for over 30,000 additional procedures, and more than 1.25 million additional diagnostic tests, which use CT or MRI scanners
• £70m to invest in new radiotherapy machines to improve cancer treatment 
• Over £2bn for NHS technology and digital improvements to increase productivity and save staff time 
• Over £600m increase in local government spending to support social care services
• £26m to open new mental health crisis centres 

Implications for the estate

Key for the healthcare property sector was the announcement that the health and social care capital budget will increase by 9.8% and 12.1% (or £3.1bn overall) this year and next.

The commitment to improving the estate comes after e recent report by Lord Darzi found the NHS had been ‘starved of capital’ funding during the 2010s – a £37bn shortfall – and that this has prevented hospitals from being productive.

Reeves said Phase 1 of the Spending Review provides record levels of capital investment for health, with an increase of £3.1bn in 2025‑26 compared to 2023-24 outturn, rising to £13.6bn, a two-year average real terms growth rate of 10.9%.

This will, Reeves said, begin to reverse the trend of capital underfunding, with over £1bn to tackle dangerous reinforced autoclaved aerated concrete (RAAC) and make inroads into the existing backlog of critical maintenance, repairs, and upgrades across the NHS estate – protecting staff and patients and boosting NHS productivity.

She also pledged to establish a dedicated fund to deliver around 200 upgrades to GP surgeries across England, supporting improved use of existing buildings and space, boosting productivity, and enabling practices to deliver more patient appointments

And it will enable continued delivery of the New Hospital Programme on a more-sustainable and deliverable footing, moving swiftly to rebuild hospitals wholly or primarily built with RAAC or which are currently in build.

Remaining schemes will be delivered through a rolling programme of major investment as part of the Government’s commitment to providing hospital infrastructure investment.

Further details regarding the programme review and next steps will be set out by the Department of Health and Social Care ‘in due course’, a spokesman said.

The reality of the challenge

Commenting on the implications of the speech, Siva Anandaciva, chief analyst at health think tank, The King’s Fund, said the cash would not be felt on the ground as much of it would be eaten up by new staff pay deals and the rising costs of delivering care.

He said: “This Budget has been delivered among a backdrop of dire NHS performance and extremely-tight public finances.

‘The Chancellor has said that ‘change must be felt’, but the health spending announced today is unlikely to be enough for patients to see a real improvement in the care they receive.

“The 3.8% real-terms uplift over two years to the Department of Health and Social Care budget will help sustain services, but is unlikely to drastically improve care over the rest of this year, and certainly not overnight. That’s because the £22bn for two years allocated for day-to-day spending will also need to cover existing commitments for new staff pay deals and rising costs of delivering care.”

Rebuilding an ailing NHS

The Nuffield Trust’s director of research and policy, Becks Fisher, added: “The funding promised today will meet the health service’s immediate day-to-day needs, but will not stretch far towards the Government’s ambitions to rebuild an ailing NHS.

“The increase in the overall Department of Health and Social Care budget is sufficient to meet the urgent £4.8bn funding gap facing the NHS in England. However, it is less clear how non-NHS health spending, such as for public health, will fare once those unavoidable immediate pressures in the NHS have been addressed.
“The Government is right to want to shift care from hospital to community, but with most funding seemingly targeted towards hospitals, eyes will turn to the Spending Review to secure money needed for transformation.”

High-quality environments

Commenting on the increased capital funding, Michael Woodford, director of the London studio at White Arkitekter, said: “The UK’s healthcare system has been suffering from inefficient funding for too long, so we’re pleased to hear about the budget allocation towards healthcare buildings and equipment.

“While this is a step towards reducing the scale of the backlog, there is a pressing need for capital investment in the context of the climate crisis.

“This means upgrading and transforming our hospitals to create high-quality healthcare environments with a sustainable design that stimulate the circular economy.

“We will be looking attentively at how the funding for the next financial year will be distributed, strongly encouraging the Government to account for renovation and planning policies that will enable us to deliver modern, healthy hospitals for its patients, people, and employees.”

Richard Coe, project director at Kajima Europe, added: “The £31bn increase in the capital budget is a positive step towards revitalising the NHS and addressing the immediate challenges faced by the healthcare system.

“However, the industry needs a pipeline of projects to ensure a steady flow of investment in health infrastructure.

“Projects take a long time; we need to do better in delivering key elements of health infrastructure.

“We hope to see a clear pipeline addressed on the 10-year plan for the UK’s health system in the spring, which will attract investment, reduce the costs associated with delivery, and encourage economic growth.”

Outdated facilities

And Anandaciva described the increase in capital spending as ‘a modest downpayment’, adding: “This will go some way towards reducing the waiting list in coming years, by increasing the number of hospital beds and surgical hubs in the NHS.

“However, the existing backlog of NHS maintenance issues with buildings and equipment is a staggering £13.8bn and the extra funding announced today will only be a modest downpayment on what is needed to tackle unsafe and outdated NHS facilities.”

To truly meet the need for more-modern, fit-for-purpose buildings, there have been calls for a new approach to using private finance following the cancellation of PFI.

Following Reeves’ speech, Peter Jackson, senior associate at UK and Ireland law firm, Browne Jacobson, said: “PFI was cancelled in 2018 after receiving criticism for issues including perceived poor value for the taxpayer and windfalls for investors that refinanced debt at lower rates following the riskier construction phase.

“The Government must identify a new private finance model that learns from the mistakes of PFI to ensure the public purse receives better value and control, while remaining attractive to the private sector.”

John Hutton, a former cabinet minister who now chairs the Association of Infrastructure Investors in Public Private Partnerships, added: “The Chancellor’s commitment to public investment in new infrastructure is to be welcomed. However, it will be impossible to get the scale of investment needed to get Britain building again without private financing.

“The UK is one of the only countries in the developed world that doesn’t use public private partnerships to build new hospitals, schools, and transport.

“We need a modern partnership between the private and public sectors that addresses the issues of the past if we’re avoid another lost decade of British infrastructure.”

The private sector will also be crucial in delivering the additional services outlined in the Budget, experts said.

A sticking plaster?

Carly Caton, a partner at Browne Jacobson, told Healthcare Property: “Any new funding that helps to add capacity will of course be welcomed within the NHS. But, to prevent this just being a sticking plaster, we must also identify new avenues to generate additional revenue for trusts and their NHS patients.

“The Government should actively encourage trusts, backed by funded support programmes, to develop a commercial mindset and explore how to maximise their available resources, while simultaneously improving healthcare services for the general public.

“Increasing private patient activity within NHS hospitals is one of the easiest routes to achieving this.

“Most trusts already do this to some extent with private patient units, but these tend to be relatively small, meaning they provide untapped potential in terms of raising additional income to plough back in to NHS services.

“There are numerous way of expanding these units and it doesn’t necessarily require significant capital investment if a trust is willing to partner with a private provider.

“Partnership structures can extend from commercial agreements to developing some form of physical expansion to estates, and all while creating new income streams for NHS patients at no cost to the taxpayer.

“Many of our decision-makers are all too keen to shout from the rooftops about the NHS being broken, but this isn’t necessarily the case – it boasts world-leading assets and expertise that, if harnessed correctly, can provide ample opportunities for healthcare to help drive economic growth as opposed to hampering it.”

Social care

The announcement of a £600m boost for social care, while widely welcomed, has been deemed inadequate to fix a ‘broken system’ and will mean some providers having to make tough decisions, experts warn.

Anandaciva said: “It is substantially less than what has been allocated to the NHS – and many social care leaders will look on with envy at the funding their health service colleagues have received.

“Care providers will also have to shoulder extra employer costs from national insurance changes and minimum wage increases, exacerbating the difficult financial position they are in.”

Fisher adds: “Increases in local authority budgets are welcome, but they face hugely-difficult decisions on where to spend to meet myriad local needs.

“The £600m social care grant announced for next year will be insufficient to enable councils to keep pace with demand.
“While changes to the carers’ allowance are a positive development and the national minimum wage and living wage increases will benefit much-valued care staff, they will put buckling council and provider budgets under pressure.

“On top of this, higher national insurance rates will pile still more costs onto organisations which provide care, many of which are already struggling.

“With no specific support to cover these costs, care providers are likely to face financial collapse, or difficult choices to pass higher costs on to people who pay for their own care.

“It is disappointing that the Budget does little to stabilise the beleaguered social care sector in the immediate term, and that the supporting rhetoric made no mention at all of the future reform it so desperately needs.”

Anandaciva concludes: “On the whole, this Budget has been a starting point for the investment and reform that is needed to begin to stabilise the trajectory of NHS performance, but it is not enough for the system to deliver the wholesale shift needed for a health and care system fit for the future.

“To achieve that, more funding will be needed in next year’s Comprehensive Spending review.”