What does the Comprehensive Spending Review 2025 mean for the NHS, health and care?

Summary of announcements

Overview

A year can be a long time in politics.

Over the past twelve months, the government has made some big calls on health and care funding.

Some decisions tightened the purse strings – for example, following the July 2024 public spending audit, the government delayed parts of the New Hospital Programme and cancelled planned reforms to adult social care charging.

And some decisions loosened the purse strings – significant new funding was given to health and care services in the Autumn Budget 2024, in part to meet rising demand and to cover new pay deals and the costs of industrial action.

The big calls continued this week, which saw the second phase of a two-part spending review that has now set budgets for day-to-day spending for 2026/27 to 2028/29, as well as capital budgets for those years and 2029/30. The two-part nature of this particular spending review also means that when ‘spending review numbers’ are given, they are sometimes referring to a range of years from the whole spending review period (ie, from a jumping off point of 2023/24) and sometimes only to the second phase of the spending review (starting from 2025/26).

Spending reviews share some features with fiscal events such as the Autumn Budget, but they are not the same thing (which is why the Chancellor appeared on Downing Street with a red folder rather than an old red box). For that reason, we don’t have as many decisions on tax-related health announcements, such as changes to duties on tobacco-related products or the Soft Drinks Industry Levy.

So, after that preamble on what spending reviews are and what they aren’t, let’s take a look at the numbers that were announced and what they might mean.

Department of Health and Social Care

The four big Department of Health and Social Care budgets to pay attention to are set out in Figure 1.

Figure 1

Day-to-day spending (RDEL)

First, let’s define some numbers that were mentioned in the spending review, before we try to forget about them – because they aren’t that helpful in the long run for understanding trends in health spending.

The Chancellor said there would be an extra £29 billion a year for the running of the health service. This is the difference in real terms between NHS England’s day-to-day budget in 2023/24 and planned spending in 2028/29. This headline number is close to the remarkably well-briefed reports in the days before the budget of a £30 billion boost for health spending.

As Figure 1 above shows, NHS England’s day-to-day spending now accounts for the majority of day-to-day spending for the DHSC overall. Over the coming year, we might see these day-to-day spending lines become increasingly fungible as NHS England is merged into the DHSC.

And these day-to-day budgets will come under a lot of pressure in coming years. The total DHSC RDEL budget (including NHS England) may have to absorb everything: the redundancy payments for staff affected by the consolidation and merger of integrated care boards and NHS England; pay awards for NHS staff that might be higher than budgeted for; prices for branded medicines that are higher than currently budgeted for (depending on the results of negotiations between the government and pharmaceutical industry), and other unknowns, such as further industrial action or cyber-attacks.

The budget documents say the investments announced this week will help the NHS to deliver its key health milestone of 92% of patients starting treatment within 18 weeks of referral. In her speech, the Chancellor noted that the government had cut waiting lists by more than 200,000. But looking at that change in the context of the long-term trend in waiting lists shows just how long and how costly meeting the 18-week target may prove (see Figure 2), so it’s little wonder that concerns are being raised over how achievable this target is.

Figure 2

In short, while the government may have currently unallocated reserves to draw upon, the spending review has set the DHSC with a financial envelope that may end up bursting at the seams by 2028/29.

Capital spending (CDEL)

Like day-to-day spending, capital investment will also rise between 2023/24 and 2029/30, although the year-to-year pattern of this spending is harder to interpret. Capital spending shoots up in phase 1 of the spending review (ie, between 2023/24 and 2025/26), then the growth both slows (becoming flat on average for the rest of the parliament) and becomes lumpier – with peaks and troughs.

This lumpy profile could be for bottom-up reasons regarding how much we need to spend within health (eg, funding might shoot up then settle down over a parliament because of intensive but time-limited efforts to build new community diagnostic centres and surgical hubs, and to procure the extra MRI and CT scanners the government promised in its manifesto). Or, equally, it could be for more top-down reasons based on overall government finances (eg, as higher than planned defence spending limits how much capital is available for other government departments, including health).

Regardless of the underlying reason, the capital budgets that have been set will now have to cope with multiple pressures. This includes the 25 schemes in the reprofiled New Hospital Programme (whose costs are expected to average £3 billion a year from 2030); rebuilding seven hospitals affected by decaying concrete (RAAC) by 2035; and building the new community facilities that might be needed to modernise the health service and deliver the 10 Year Health Plan.

The budget also announced more technology funding (which we mention here but will likely be a mix of both day-to-day and capital spending). There is a commitment to invest up to £10 billion (cumulative over the next three years) in NHS technology by 2028/29. This will help turn the NHS App into the digital front door of the health service and deliver a single patient record. Technology spending will reportedly increase by almost 50% from 2025/26 – though there is next to nothing in the public domain on what the official ‘NHS technology budget’ is, or how it has waxed and waned in previous years, which makes this commitment hard to judge.

The flattening capital investment will rightly be a cause for concern in the health service. For most of the past decade it became normalised to set capital budgets and then raid them to support day-to-day spending – a long-term capital plan would be measured in months rather than years. And technology funding was not spared when savings needed to be made. So it is welcome that the new government has vowed to stop the raids and set out longer-term settlements – the health service knows how much capital it will have available each year between now and 2029, which can help improve planning and value for money.

And the government may not be done yet. With recent announcements of a potential return to privately financed capital investment in the NHS, it may be that one way of squaring this fiscal circle is by colouring outside the lines. On the face of it, flatlining public capital investment in the spending review could make more sense if private finance is intended to pick up the slack – but even more recent models of private investment took some years to get going. So private finance may prove to be both contentious and necessary, but it might not be a quick fix.

Total health spending (TDEL)

It is hard to imagine, but by the end of this parliament the total DHSC budget will be just under a quarter of a trillion pounds. To contextualise increases in its budget, it’s best to look at how much the budget grows in percentage terms on average (ie, smoothing out the jumps from year to year) and in real terms (ie, adjusting for inflation), rather than quoting numbers in the billions.

On this measure then, total health spending (ie, DHSC TDEL) will grow by 2.8% a year on average in real terms over the entirety of the spending review period, and at the slightly lower rate of 2.7% for phase 2 of the spending review (ie, the years left in this parliament).

The government also reiterated the need for the NHS to deliver value for taxpayers from this extra health spending. The financial settlement for the NHS is predicated on the NHS delivering 2% productivity growth each year. No one should argue against the NHS reaching for greater productivity to improve services for patients and deliver more for taxpayers, but in a document published alongside the spending review even the government’s new Office for Value for Money notes that this level of productivity savings would be a substantial increase on the 0.6% productivity improvements that were delivered before the Covid-19 pandemic.

So for health spending overall, the increases to health spending are far above the near flat levels of austerity and far below the turbo-boosted Blair/Brown years. The first law of health economics is that countries spend more on health as their economies grow, but the UK economy is not growing as much as it used to. As the Institute for Fiscal Studies notes, over 40% of departmental spending is now going on the NHS, compared with just over 25% at the start of the noughties. So if the upcoming 10 Year Health Plan is going to transform our experience of health care, then it won’t come from the massive increases to NHS spending and staffing numbers seen at the start of this century.

Adult social care

What does the spending review mean for adult social care? It feels like the cover has been left on the crystal ball. In her speech, the Chancellor said the government would back the ‘first ever fair pay agreement’ in adult social care (which becomes even more important to attract domestic talent into the sector now that the government is planning to curtail international recruitment). But not a word of the 132-page main document accompanying the spending review provides details as to how much this will cost the sector.

The spending review documents did include the promise of an additional £4 billion of funding for adult social care in 2028/29 compared with 2025/26, which includes more funding from the NHS’s minimum contribution to the Better Care Fund. It seems inevitable that the costs of the Fair Pay Agreement will have to come from this extra £4 billion. In turn that suggests that the budget to increase pay will be modest, particularly as the Local Government Association has already warned that wider council budgets will face severe financial pressure simply to deliver existing services.

While the budget documents say the government recognises the significant challenges facing the adult social care sector, there was a telling exchange in Prime Minister’s Questions immediately before the spending review announcement. When Sir Ed Davey asked whether the Prime Minister agreed that no amount of money for the NHS will solve its crisis unless we also invest in adult social care, a large part of the Prime Minister’s answer focused on the extra NHS appointments the government had delivered. Meanwhile, the adult social care sector, and those who rely upon it, are still waiting for transformative reforms.

Creating and sustaining good health

The spending review included some other announcements relevant to health and care, including expanding eligibility for free school meals and a renewed commitment to invest at least £80 million a year for tobacco cessation programmes and support of the Tobacco and Vapes Bill.

A small part of the Transformation Fund announced in the Spring Statement 2025 will be targeted at supporting early interventions to address the causes of homelessness. And there is £950 million of capital investment for a further round of the Local Authority Housing Fund to help 28 local authorities increase their supply of good-quality temporary accommodation.

Finally, the spending review included a series of announcements on life sciences – though perhaps fewer than expected considering the briefings in the days running up to the budget. The upcoming Industrial Strategy will be supported by up to £22.6 billion a year of R&D funding by 2029/30. And there is £600 million spread over 2026/27 to 2029/30 for the Health Data Research Service, and up to £520 million more for the Life Sciences Innovative Manufacturing Fund over 2025/26 to 2029/30. More details on how this funding will be spent – together with how new ‘innovation clusters’ will be developed across England – are due later in June 2025 when the Life Sciences Sector Plan is expected to be published alongside the government’s Industrial Strategy.

Conclusion

So what to make of all this?

There is certainly something discordant about the timing of health and care policy announcements at the moment. The health and care service has been given its financial envelope for the rest of this parliament. But what is meant to go in the envelope? We already had an elective recovery plan and urgent and emergency care strategy. But we don’t have the 10 Year Health Plan, Life Sciences Sector Plan, Industrial Strategy, early thinking from the Casey Commission into social care, or the details of the Fair Pay Agreement. Until those documents are published, it is hard to understand what the public and taxpayers will get in return for this funding. In his speech a day after the spending review, one thing is clear though – Wes Streeting is game for rewiring how NHS finances work so that the funding on the table is more closely tied to reform of the NHS.

There is also something about contextualising what was announced for health and social care. If you look at other government departments, the comparisons are flattering. Health will be billed as one of the ‘big winners’ from this budget – and seeing health and care spending in the wider context of government spending (see Figure 3) is always a useful reality check as to why other public services would look at NHS settlements with envy. The teachers delivering remote teaching because of dangerously old school buildings will be all too aware that the NHS is not the only public service that is literally afraid of the roof falling in.

Figure 3

But look at history and the comparisons are far less flattering. The new funding deal for DHSC TDEL is not only less than the long-term average the health service receives, but less than the 3.8% increases the Autumn Budget 2024 set out between 2023/24 to 2025/26. Not for the first time then, health services will see significant funding increases without it feeling like a bonanza for the people who run or receive services.

Wes Streeting might well be pulling his hair out at the prospect of having delivered a £29 billion settlement for his department, only to be questioned over whether this sum will be ‘enough’. But fundamentally, the Health and Care Secretary was absolutely right when he said that the NHS can’t be fixed from a single fiscal event – and it won’t be fixed from a single spending review either.

And so then to trade-offs. The government has rightly talked about the need to make trade-offs and difficult choices – the Chancellor used the word 25 times in her speech. The government has chosen how much it wants to spend on public services, and how much it wants to spend within that on the health and care service. They must know that it is not enough to achieve all of the ambitions in their manifesto.

But at the moment the trade-offs are still too coded to see. In its manifesto, the government said that all NHS waiting-time targets would be met by the end of this parliament. We know the manifesto commitment on waiting times for routine hospital care (the 18-week target) has been reinforced – with the government making this target its key health milestone over the course of this parliament. But what about long waits in A&E departments? Or cancer standards? Or ambulance response times and mental health waiting times? For now, the answer is ‘to be determined’ (see Figure 4) – and this is just one example of the trade-offs that might still be coming.

Figure 4

No doubt, some things will get better over the coming years. From the visually-impaired patient who can have digital communication read aloud rather than waiting for a letter to arrive about their next appointment, to the staff who can use ambient AI to cut back the amount of time they spend at home in their pyjamas doing clinical admin. But the trade-offs that are coming cannot be avoided. They will touch all of us and define the service we receive over the next few years.  

The Comprehensive Spending Review has provided more clarity, but we wait now for the 10 Year Health Plan and Casey Commission to tell us what type of health and care service all this spending will buy. On his first day in office, Wes Streeting said that the NHS is broken. We now know the funding settlement for health and care until the next election. But it is only when we see the rest of the reform plans for health and care that we will know what in our health and care service will be fixed, what can be patched, and what might – unfortunately for us all – stay broken.  

A final word. This is the 17th or 18th time I have recapped a budget or spending review over the past eight years. I am left thinking how similar this one feels to the past, but also how different it could have been. By the end of this parliament, I hope that rather than focusing on DHSC CDELs and TDELs and RDELs, I will be summarising a coherent government spending plan that spans multiple government departments and public services, and which shows how spending decisions are going to improve our health and reduce health inequalities. For the moment, when I look at the spending review 2025, I see a plan for the NHS. When I look at the next spending review in 2027, I hope I’ll see a plan for a health mission.