NHS leaders concerned over potential unbudgeted pay rises
Further cuts to staffing and services are likely if NHS organisations need to shoulder additional pay costs above what is included in the NHS budget.
That is the warning from the NHS Confederation following reports that the government could accept a pay rise for NHS workers in England above what has been allocated in the health service’s budget for 2025/26.
Recent media reports have speculated that the Independent Pay Review Body, which advises on the pay of NHS workers, has recommended a pay award of 3 per cent for Agenda for Change staff in 2025/26. This covers the majority of NHS staff including nurses, paramedics, occupational therapists and healthcare support workers.
However, this would be above the 2.8 per cent that is budgeted for. A recommendation from the Doctors’ and Dentists’ Review Body has been submitted to government, and NHS leaders are worried this could also propose pay rises beyond what is budgeted for.
It is estimated that every extra 0.1 per cent on pay for all staff groups – doctors and dentists as well as Agenda for Change staff – costs around an extra £125 million a year recurrently. So, if both pay review bodies recommend a pay rise of 3 per cent it could cost the NHS an estimated £250 million extra on top of the funding it has allocated for pay rises this financial year.
Only days ago, NHS England chief executive Sir Jim Mackey thanked leaders on agreeing balanced budgets recognising the many challenges of now staying within those budgets. An unfunded pay increase runs the risk of unravelling much of that work.
With integrated care systems and NHS trusts already being asked to make tough efficiency savings in 2025/26, there is a risk that if NHS organisations in England have to find the extra funding from their own budgets this could require cuts elsewhere.
This will be challenging for all providers, but mental health and community providers will feel the pinch a bit more as they spend a greater proportion of their budgets on pay due to the nature of the care they provide.
Matthew Taylor, chief executive of the NHS Confederation, said the NHS has little to no headroom to make up the difference if what is agreed is above what has been budgeted for in 2025/26.
He added: “While we respect the independent pay review body process and its recommendations, any decision by government to increase NHS pay beyond the 2.8 per cent that is in the budget this financial year will result in extra cost pressures that cannot be easily absorbed.
“It is vital we continue to invest in the dedicated staff whose hard work and goodwill keeps patients safe every day of the year. We know they have faced years of limited pay increases and that is why we welcomed the government prioritising ending the industrial disputes and uplifting pay – including more generous offers for resident doctors. This will be vital for helping to boost recruitment and retention in the long term.
“However, the NHS has entered one of its most challenging financial years, with NHS organisations having to deliver unprecedented efficiency savings. These are already resulting in cuts to certain roles and services, with more cuts expected this year.
“Asking local NHS organisations to cover the difference themselves is effectively asking them to make cuts elsewhere, which is not sustainable.”
Integrated care boards have been charged with cutting their running costs by 50 per cent from October 2025 and NHS trusts told to reduce their “corporate cost growth” by half the amount from the year before the pandemic.
The NHS Confederation has already called for a national staff redundancy fund to smooth the pathway to the major budget cuts, or it could leave the health service in a financial deficit in the next financial year.
