NHS funding deficits

The NHS and the wider Department of Health and Social Care often balance their budgets at a national level and remain within their annual spending limits. But this masks the serious financial pressures many individual organisations within the NHS have reported over recent years. The financial pressures on these organisations can have a direct impact on patients and their care.

Why do deficits happen?

At the most basic level, deficits happen when spending exceeds income. This can be driven by insufficient income, above-expected spending or both. UK government spending on all health services increased by an average of 3.1% a year in real terms between 2015/16 and 2023/24. However, for many organisations, this has not kept pace with growing costs. Costs have been driven up by a range of factors, including increasing demand and the increasing cost of delivering care. Over the past few years, the NHS has faced several unexpected challenges that require additional spending. For example, industrial action and recruitment and retention issues have led to higher spend on temporary staff; energy bills have increased; and non-pay related inflation is estimated to have cost the NHS an extra £1.4 billion in 2023/24.

It is worth noting that other public services are also experiencing income that has not kept pace with spending. For example, local authority spending power is lower in 2025/26 than it was in 2010/11, despite increases in demand.

Are NHS trusts in deficit?

There are more than 200 NHS providers (or trusts) in England, providing acute, ambulance, community and mental health services to treat patients and service users. The majority of NHS spending is through these NHS trusts.

Total trust deficit peaked in 2015/16, when the net deficit was £2.5 billion and 66% of trusts were in deficit. This subsequently led to the government providing additional ‘sustainability and transformation’ funding for the NHS, which contributed to the fall in reported deficits over the following years.

Trusts were briefly in surplus during the pandemic, due, in part, to additional Covid-19 funding and new financial management arrangements that were put in place to help the NHS deal with the pandemic. However, in 2024/25, NHS trusts were, overall, in deficit by £0.78 billion.¹

This overall deficit masks substantial variation across trusts. Acute trusts account for 75% of trust spending and in 2024/25 and 69% of these trusts (82 trusts) were in deficit. Across other sectors, the percentage of trusts in deficit varied from 10% (1 trust) of ambulance trusts to 44% of community trusts (8 trusts). There were similar levels of variation by trust type in 2023/24 (the most recent year with individual trust-level data available.

Are integrated care boards (ICBs) in deficit?

ICBs are the local commissioners of NHS services, who have a duty to ensure their annual budgets are not exceeded. As well as spending by trusts, ICBs face additional cost pressures, including capital spending, continuing healthcare spending, primary care and prescribing costs. ICBs inherited the financial position of clinical commissioning groups (CCGs), which had collectively been in deficit before the pandemic (between 2017/18 to 2019/20).

ICBs were in deficit in their first three years of existence– by £0.5 billion in 2022/23, £1.4 billion in 2023/24 and £0.6 billion in 2024/25, largely because of deficits in the trusts they manage. ICBs are forecast to have balanced their finances by the end of 2025/26. However, this is only possible with the help of ‘deficit support funding’ from central government – without this ICBs would be £2.2 billion in deficit by the end of 2025/26. The government has set a target for all ICBs to break even without deficit support funding by the end of 2028/29.

Is the NHS overall in deficit?

Despite deficits at the trust and ICB level, overall the NHS in England reported a small underspend in 2024/25. Revenue spending (also called resource spending – day-to-day expenditure on staff salaries, medicines etc) was under budget by 0.6% and capital spending (buildings, equipment etc) was under budget by 2.4%. The total budget needed to fund the NHS for a year is hard to predict, so the NHS in England often ends the year underspending its budget to avoid any consequences of overspending its budget.

Historically, the NHS has also transferred funding from capital budgets to support day-to-day spending – in the short-term this has mitigated overall deficits but in the long-term has led to under-investment in NHS buildings and equipment.

What is being done to address deficits, and why do they matter?

The 2024 Autumn Budget announced a £22.6 billion cash injection for the NHS, to help alleviate some of the financial pressures on the NHS. However, the government has made it clear that it is also expecting NHS organisations to make financial savings to balance future budgets. For example, in 2025/26, NHS organisations are expected to reduce their running cost, increase productivity by 2% and reduce their spend on agency and bank staff. As a result of ongoing financial pressures, leaders are making tough financial decisions about whether to cut or consolidate services, reduce numbers of frontline staff, or reprioritise investment in services, all of which could directly impact the care people receive.

In the long-term, the government will need to consider how to sustainably manage the increasing costs of delivering health care, so that NHS organisations can avoid financial deficits whilst still meeting the care needs of the population.