Budget 2026: NHS Alliance submission

1. To support local NHS leaders to continue to deliver improvements while containing costs, government should be realistic about what it expects the NHS to deliver with the resources available, support them to take difficult decisions where these are required and recognise that sustained financial pressures are likely to affect the pace at which transformation can be delivered.
2. Government must do all it can to mitigate the impact of the additional financial pressures facing the NHS this year – such as rising inflation, industrial action and the implications of the 2026 UK-US trade agreement – costs that had not been factored into the 2026/27 budget.
3. While the 10-Year Capital Plan is welcome, leaders have significant concerns that the resources available to them will not be sufficient to deliver the scale of the transformation and improvement required. The government must avoid further cuts to NHS capital budgets moving forward and should look to provide a significant real terms increase to the DHSC CDEL at the next Spending Review.
4. The government must commit to further reforms of the capital regime to maximise the benefits of multi-year capital allocations and provide sufficient flexibility to manage capital across financial years.
5. The government should set out a clear approach for sequencing national priorities, provide dedicated support for managing transition costs and develop new financial mechanisms that will enable the shift in resources from hospital to community. This will ensure organisations have the time, capacity and financial headroom to deliver transformation without destabilising existing services.
6. Government should ensure sufficient investment flows to primary care and community services to ensure they have the capacity, workforce and infrastructure required to meet growing demand and deliver the Government’s ambitions for prevention, population health and provide more care closer to home.
7. Government must put in place a robust mechanism to ensure that investment in mental health services grows in line with the expansion of services the sector is implementing to help meet sustained increase in demand. It is vital that investment in mental health services does not fall further behind the growth in investment in physical health services.
8. Government should provide clarity on how the NHS, local authorities and strategic authorities may work together under future devolution arrangements, while ensuring both the NHS and social care have the resources required to tackle shared challenges, improve population health and support more integrated models of care.

Our report,Targets and trade-offs: NHS finance and performance ambitions in 2026/27,published in May 2026, outlines that while genuine progress has been made on improving the financial sustainability of the health service, the financial challenges facing organisations are becoming more difficult. Over the 2025/26 financial year, proportionately more organisations delivered their financial plans (from 70% in 2024/25 to nearly 80%); the aggregate system-wide deficit reduced (from around £900m in 2024/25 to £563m when excluding deficit support funding); productivity continued to improve; staff levels are falling for the first time since 2013; and record-high efficiency savings were delivered across the health service (£10.2bn over the financial year) (NHSE, 2026). These achievements reflect the considerable effort made by NHS leaders and staff to improve financial performance, while also continuing to reduce care backlogs and meet rising demand.

However, nearly all leaders surveyed (97%) expected the 2026/27 financial year to be as hard, or harder than, 2025/26. While the NHS has demonstrated its ability to improve financial performance, leaders were clear that doing so is becoming increasingly challenging. The report found growing concern about the sustainability of year-on-year efficiency requirements, particularly as many of the remaining opportunities for savings involve difficult trade-offs such as reconfiguring services or reducing staffing levels. Around two-thirds (64%) of leaders expected to reduce or redesign services in order to deliver financial plans, while 57% anticipated reductions to clinical staffing levels. At the same time, organisations are being asked to improve operational performance reduce waiting times, increase productivity and deliver the ambitions of the 10-Year Health Plan (10YHP) - creating a growing tension between achieving annual financial plans and long-term transformation objectives. While leaders remain committed to delivering greater value for taxpayers and improving productivity, there will be clear consequences to the cuts that have to be made in order to ensure challenging financial plans are delivered this year. Many warned that, without greater realism about the competing priorities that many organisations are facing and the pace of change expected of the NHS, there is a growing risk that efforts to improve financial sustainability will affect patient experience, workforce morale, and the service's capacity to deliver the ambitions of the 10YHP.

Alongside these underlying challenges, NHS organisations continue to face a number of external pressures which risk making delivery of financial plans this year even more difficult.

Inflation remains a major concern across the health and care system, especially as the conflict between the US and Iran continues to impact prices and global supply chains. The Office for Budget Responsibility’s forecast for Consumer Price Index (CPI) inflation in March 2026 for this year was 2.3%, whereas the latest monthly figures from the Office for National Statistics shows that the CPI rose by 2.9% in the year to July 2026. Our survey outlined that 85% of trust and ICB leaders and 95% of primary care leaders regarded inflationary pressures as a significant barrier to meeting financial plans. Continued inflation affects a wide range of costs across the system and reduces many organisations’ ability to invest in service improvement and transformation, placing further pressure on already demanding financial plans.

Industrial action and wider workforce pressures also continue to create significant uncertainty for NHS organisations. Our survey found that two-thirds (66%) of trust and ICB leaders identified industrial action as a barrier to delivering financial plans. This reflects both the financial cost of managing industrial action and the operational disruption it causes. For example, the strike action by resident doctors that took place in April 2026 diverted leadership attention away from productivity and transformation initiatives, disrupted planned activity and created additional costs associated with maintaining safe services and recovering lost appointments and procedures. Leaders remain concerned that further industrial action would severely risk undermining progress made in reducing waiting lists and improving performance, while placing further pressure on already stretched budgets. More broadly, the forthcoming 10 Year Workforce Plan will need to provide a clear and credible framework for workforce supply, retention and pay, ensuring that workforce ambitions are aligned with both service demand and the wider ambitions of the 10YHP. We welcome government’s commitment to continue working with employers and trade unions on reform of national contracts, including ongoing discussions regarding Agenda for Change (AfC). We also recognise the important role that constructive industrial relations will play in supporting long-term workforce sustainability.

Medicines expenditure is becoming an increasingly significant and under-recognised source of financial pressure across the NHS. These pressures are felt across the system from ICBs to community pharmacies. ICB leaders have highlighted a growing mismatch between local funding allocations and the costs associated with implementing NICE guidance, meeting the Voluntary Scheme for Branded Medicines Pricing, Access and Growth (VPAG) commitments and accommodating the implications of the 2026 UK-US trade agreement. Furthermore, recent contractual uplifts for community pharmacies have provided welcome support, but community pharmacies remain under considerable financial strain despite the vital role they play in improving access to care, supporting prevention and enabling the shift towards community-based services.

NHS organisations are also reporting increasing concerns about access to clinical research funding, particularly among larger and specialist providers. Research activity represents an important source of income for many organisations, while also supporting the NHS’s wider contribution to economic growth, innovation and the government’s Life Sciences Sector Plan. Without action to address these pressures, there is a risk that wider government ambitions for innovation, life sciences and care closer to home are undermined.

While the NHS has demonstrated its ability to improve financial performance, doing so is becoming increasingly challenging. Leaders remain committed to improving productivity and delivering value for taxpayers, but they are equally clear that difficult trade-offs are becoming unavoidable as opportunities for further efficiencies become more limited. To support NHS leaders in these challenging circumstances, government must back local leaders to make these difficult decisions and be realistic about what it expects the NHS to deliver with the resources available.

While health is a devolved responsibility, the UK's health and care systems remain deeply interconnected and face many of the same underlying challenges. Health inequalities, poor population health and rising levels of chronic illness continue to place significant pressure on services across all four nations. Future investment decisions should therefore support a shared ambition to improve population health, reduce inequalities and build more sustainable health and care services across the United Kingdom.

The NHS Alliance, and its predecessor organisations the NHS Confederation and NHS Providers, have consistently called for a long-term capital strategy that aligns investment in the NHS estate with the strategic direction of the 10YHP. Therefore, publication of the 10-Year Capital Plan (10YCP) is a welcome and important development. The plan recognises that capital investment is essential to delivering the shifts from hospital to community, analogue to digital, and treatment to prevention. However, our assessment remains that there is a fundamental gap between the vision set out in the plan and the funding and financial framework available to deliver it. While the plan provides greater strategic direction, it does not yet resolve the underlying challenges that continue to restrict organisations’ ability to modernise infrastructure, transform services and invest for the long term.

This challenge has been made more acute by the decision to reduce annual department capital budgets by 1% over the remainder of the Spending Review period to support the Defence Investment Plan. Although health capital spending remains at historically high levels, NHS leaders already had significant concerns about whether existing budgets would be sufficient to meet growing demand for capital investment across the health service. As a result, there is a risk that organisations do not have access to the funding required to deliver the scale of estate transformation envisaged in the 10YCP. The central challenge is therefore no longer the absence of a long-term vision, but whether NHS organisations have the resources and flexibility required to realise that vision over the next decade.

The scale of the challenge in tackling the NHS maintenance backlog clearly illustrates this mismatch. The commitment to provide at least £6.75bn through the Estates Safety Fund over the next nine years is welcome and represents an important acknowledgement of the extent of the challenge facing NHS organisations. However, this must be viewed in the context of a maintenance backlog that now stands at almost £16bn and grows by an average of £1bn per year, alongside significant and longstanding challenges across the primary care estate (NHSE, 2025). Heatwaves over the summer this year have provided a stark reminder of the infrastructure risks that organisations continue to carry, as staff have struggled to adapt ageing buildings to extreme heat – this affects productivity, staff wellbeing and creates risks for patient safety. Without sufficient investment, organisations will continue to devote scarce resources to managing deteriorating infrastructure rather than transforming services and improving care.

Recent reforms to the NHS capital regime are welcome. Multi-year capital budgets, streamlined approval processes and higher delegated spending limits are all positive steps that respond to longstanding concerns from NHS leaders. However, these reforms do not yet go far enough to ensure that organisations can realise the full benefits of multi-year planning. In particular, the continuing requirement to spend capital within the financial year can result in investment decisions being driven by accounting deadlines rather than prioritising investment on projects that represent the best value for money. To take full advantage of longer-term planning horizons, NHS organisations will need more flexibility to carry capital funding between years, manage project delays and reinvest funding where it can have the greatest impact. Further consideration is also needed as to how advanced foundation trusts can meaningfully exercise capital freedoms while remaining constrained by wider Capital Departmental Expenditure Limit (CDEL) rules.

Capital investment will also be central to delivering the government's ambition to shift care closer to home. The additional £200 million for modernising existing general practice (GP) premises and £200 million to support the delivery of neighbourhood health centres are welcome signals of intent. However, estate challenges extend beyond capital investment alone. Across the primary care estate, the revenue funding available to support premises reimbursement has not grown in line with the rise in property costs, raising questions about whether the existing GP rent model can sustainably support current premises while enabling future transformation. Similar questions also arise in relation to the government’s ambitions for neighbourhood health centres and mental health emergency departments. While capital investment can support the development of new facilities, organisations will need sufficient revenue funding in order to sustainably staff and operate from these new facilities.

Local leaders continue to encounter barriers when attempting to develop strategic estate solutions across organisational boundaries. Fragmented ownership arrangements, cross-charging mechanisms and restrictions on how funding streams can be combined often prevent systems from making the best use of available resources. The government's ambition for neighbourhood health centres provides a significant opportunity to address these challenges, but successful delivery will require greater flexibility for systems to plan and fund estate strategically. There is considerable appetite locally to bring together NHS capital funding, regeneration programmes, Section 106 and Community Infrastructure Levy (CIL) contributions, local authority investment and other funding sources to support integrated neighbourhood facilities. A stronger "one public estate" approach, underpinned by closer coordination between HM Treasury, the Department of Health and Social Care and the Ministry of Housing, Communities and Local Government (MHCLG), would help unlock this potential. Organisations should be supported to retain and reinvest proceeds from surplus estate in a way that can support their local systems, facilitate co-location between primary care and wider community services, and make better use of public assets to support neighbourhood health centre development.

Sustained investment in digital and data infrastructure will be equally important. The 10YCP’s commitment to digital transformation, including investment in artificial intelligence, the NHS App and the single patient record, reflects the scale of ambition set out in the 10YHP. However, the successful adoption of digital technologies requires more than capital investment alone. Realising productivity gains from artificial intelligence and digital transformation will depend on adequate investment in workforce capability, implementation support, assurance frameworks, regulatory oversight and the underlying infrastructure required to deploy these technologies safely at scale. Capital investment in digital infrastructure must therefore be matched by sufficient revenue investment to support adoption and implementation across the NHS.

Ultimately, the success of the 10YCP will be judged by whether it enables NHS organisations to modernise their estates, improve productivity and deliver the transformation required by the 10YHP. The direction of travel is welcome and long overdue. However, unless funding is aligned with the scale of the 10YCP’s ambition and further reforms to the capital regime are made, there is a real risk that infrastructure constraints will continue to limit progress towards the vision for a more preventative, digitally enabled and community-focused health service.

There is unanimous support from across the health service for the ambition set out in the 10YHP to shift care from hospital to community, from treatment to prevention and towards more integrated neighbourhood-based services. There is a broad consensus that transforming how care is delivered will be essential to improving population health, reducing inequalities and ensuring the long-term sustainability of the health service. A critical part of this transformation will be enabled by reforming the financial framework. NHS leaders broadly agree that changes to payment mechanisms, financial flows and introducing new financial incentives will be essential if resources are to meaningfully shift towards prevention, primary care and community services. Our report, NHS financial reform and the 10 Year Health Plan: aligning vision with delivery, sets out a number of principles to help inform the implementation of planned reforms to the financial framework.

NHS leaders support the development of financial arrangements that encourage integration, incentivise a focus on outcomes rather than activity and support the shift of resources into community settings. Some leaders believe that the current financial framework often reinforces a hospital-centric model of care, focusing on units of activity, rather than incentivising collaboration and a longer-term focus on improving outcomes for patients. Rewiring financial flows will be one of the primary drivers that will help support a neighbourhood-based model of care. However, while leaders are committed to progressing this agenda locally, they are continually faced with significant barriers to progressing this meaningfully by constrained finances that give them little headroom to invest in transformation initiatives.

The principal challenge continues to be the cost of transitioning to a new service model. Moving care closer to home is unlikely to be cost-neutral in the short term and will require a period of “double running”, in which it will be necessary to maintain existing capacity while simultaneously investing in new community, primary care and preventative services. NHS leaders remain concerned that there is not a credible approach to managing these transition costs at scale. Moving resources too quickly will risk destabilising organisations that are already under significant financial pressure, particularly if investment is shifted before new community-based models have had time to embed and deliver a proportionate reduction in demand.

Successfully rewiring financial flows will also require a different approach to financial risk and provide organisations with a greater ability to take advantage of a multi-year approach to financial planning. New approaches, including risk-sharing and gain-sharing arrangements, have the potential to support more integrated models of care and encourage organisations to work collectively around population outcomes. However, these approaches often require upfront investment, with benefits taking time to be realised.

NHS leaders have welcomed ongoing efforts to move away from block contract arrangements, with further work underway to deconstruct such arrangements for community and mental health services over time. There is broad support for developing payment approaches that better reflect the care being delivered and create a stronger focus on incentivising an improvement to health outcomes at its core. However, it is vital that new payment mechanisms are based on tariffs that accurately reflect the true cost of delivering care. If tariff prices are not kept up to date, then there is a credible risk that new payment models more closely linked to activity levels embed financial deficits across the health system.

The 10YHP committed to the development of capitated approaches to payment mechanisms, including year of care payments, which have the potential to support more preventative, person-centred care closer to home. NHS leaders can see how such payment approaches will encourage a focus on an individual’s whole pathway of care, rather than isolated episodes. However, many systems report having limited strategic capacity to undertake the work required to develop, test and implement such payment models. NHS leaders would welcome further national guidance and practical support to develop new capitated payment models and implement these sustainably.

Ultimately, there is broad agreement across the NHS that financial reform will be essential to delivering the ambitions of the 10YHP. The challenge is not establishing the direction of travel, but ensuring reforms are implemented in a way that genuinely drives change while remaining affordable and sustainable. There is a risk that systems become trapped between models of care, incurring the costs of change without fully realising its benefits.

Mental health services continue face extraordinary levels of demand, with contacts increasing by 81% since 2016. While providers have worked hard to improve access and expand services, rising demand continues to place significant pressure on capacity across the mental health sector.

The Mental Health Investment Standard (MHIS) has played an important role in safeguarding funding for mental health services and helping to address historic underinvestment. We therefore welcomed the government’s commitment to retain a form of protected funding for mental health through the medium-term planning framework. However, we are concerned that recent changes weaken the safeguard for mental health spending and over time could lead to less investment in these services. The move from requiring mental health spending to grow as a proportion of overall ICB expenditure to a flat real-terms uplift, combined with the removal of independent auditing of the MHIS, reduces the strength of the safeguards that have helped protect mental health funding in recent years. These concerns are heightened by the fact that the national share of NHS spending on mental health has reduced for three consecutive years. Without a robust mechanism to protect mental health investment, there is a risk that spending on mental health falls further behind physical health services, despite the continued growth in demand.

The consequences of underinvestment in mental health are not limited to the mental health sector. Poor mental health drives demand across primary care, acute services, social care and wider public services, while also having a considerable impact on employment, productivity and economic growth. It is for these reasons that government should ensure that there is a clear and robust expectation for funding growth for mental health services and link this to the longer-term commitment to shift care towards preventative and community-based services. Continued progress towards more outcomes-focused investment, alongside work to reduce variation and improve productivity, across mental health services will support government’s ambitions for prevention, neighbourhood health and an improvement to population health.

The capital settlement also does not resolve the wider challenges facing the existing mental health estate. The maintenance backlog across mental health facilities now exceeds £1 billion and many providers continue to operate from ageing, unsuitable and outdated buildings (NHSE, 2025). Longstanding underinvestment has left parts of the mental health estate struggling to meet the expectations of modern service delivery, with services often being provided from environments that were not designed to support contemporary models of care. This has implications not only for patient experience and staff wellbeing, but also for safety, productivity and the ability of organisations to deliver therapeutic, recovery-focused care.

Lord Darzi's review highlighted the poor condition of parts of the mental health estate and the consequences of chronic underinvestment in NHS capital (Lord Darzi, 2024). While investment in mental health emergency departments and neighbourhood mental health centres is welcome, new facilities alone will not address the challenges facing existing services. Investment in new models of care must therefore be matched by sustained funding to modernise the wider mental health estate, ensuring services can be delivered from environments that are safe, therapeutic and fit for the future.

NHS leaders welcome the government’s commitment to devolution and the opportunity it presents to strengthen collaboration between the NHS, local government and emerging strategic authorities. Many of the challenges facing health and care services, including poor population health, health inequalities and rising demand, cannot be addressed by the NHS alone. Closer collaboration provides an opportunity to take a more integrated approach to improving health outcomes, supporting prevention and aligning public services around the needs of local communities.

However, it will be important that changes are implemented carefully and with clear accountability arrangements. NHS organisations are already adapting to significant reforms following the 10YHP and further disruption to local systems should be avoided wherever possible. As devolution arrangements take shape, greater clarity will be needed around the respective roles of mayors, strategic authorities, integrated care boards and the NHS regions, and how these different organisations will work together to support integration, local decision-making and improved outcomes for communities.

Devolution also presents a significant opportunity to strengthen collaboration on economic growth, regeneration and investment in the wider determinants of health. NHS organisations are often some of the largest employers, purchasers and anchor institutions within their local economies and can make a substantial contribution to local growth and regeneration strategies. As outlined in NHS Providers’ 2025 report, Investing in the NHS: empowering the sector to drive productivity, renewal and growth, initiatives such as Health on the High Street demonstrate the potential for health services to play a wider role in supporting local regeneration and economic growth. The move towards integrated settlements and greater fiscal devolution could provide welcome flexibility to invest in shifting services into communities, support prevention and invest in the wider determinants of health, while enabling resources to be aligned more effectively around local priorities.

There is also considerable potential for the NHS, local authorities and strategic authorities to work more closely together through a "one public estate" approach, making better use of public assets, supporting local regeneration and enabling the development of integrated neighbourhood services. However, existing barriers, including CDEL limits for NHS organisations and IFRS 16 accounting rules, can discourage collaboration and limit opportunities to align investment across organisational boundaries. Addressing these barriers would help unlock the full benefits of devolution and enable closer partnership working across the public sector.

Alongside devolution, meaningful progress on social care reform remains essential. The NHS and social care are deeply interdependent, and pressures in one part of the system are invariably felt in the other. It is therefore vital that social care services have access to the resources required to meet growing demand, improve services and build a sustainable workforce model. Ensuring both the NHS and social care are adequately funded will provide a stronger foundation for integration, improve outcomes for individuals and support efforts to reduce avoidable pressure on health services.