Autumn Budget 2025: what you need to know

Summary

The biggest health announcement is that the UK Government will proceed with plans for up to 250 neighbourhood health centres in England, of which 120 will be operational by 2030. The vast majority will be funded by a new on-balance sheet public-private-partnership (PPP) model to be announced later. A small remaining number will be funded through public capital. 

The new PPP model will learn lessons from previous PPPs, including Private Finance Initiative, and is currently restricted to neighbourhood health centres. The NHS Confederation and our members welcome this development, having been the first to call for a new PPP model a year ago.

This Budget did not have a health focus, following significant health announcements at the Spending Review in June Overall, the Chancellor increased her ‘fiscal headroom’ to £22 billion to stay within the government’s self-imposed fiscal rules, according to the Office for Budget Responsibility (OBR). This mostly comes from reducing planned spending towards the end of the decade – although the NHS in England remains ‘protected’ from these cuts. 

The OBR predicts inflation will be higher both this year and next compared to their predictions in March. This will mean likely - although uncertain - implications for current and future pay negotiations as HM Treasury and the Department for Health and Social Care will have based their budget for pay rises on March’s estimate.  

The overall budget for health and social care in England will increase by an average of 2.4 per cent in real terms over the 2025-26 to 2028-29 Spending Review period. This is slightly lower than the 2.7 per cent forecast in June, likely reflecting changes in the OBR’s inflation projection.   

There is £300 million of new capital investment for NHS tech, with new digital tools intended to help NHS staff and improve productivity. 

NHS prescription charges in England will be frozen in 2026-27 with the cost of a single prescription remaining at £9.90.

The Chancellor also announced changes to pensions salary sacrifice allowance to come into force from April 2029 – beyond the scope of the existing Spending Review. It is unlikely to affect the NHS Pension Scheme but could impact NHS contracts with third party providers. 

The Spending Review assumed that spending on branded medicines (around 7 per cent of NHS RDEL) would rise by 25 per cent (£3.3 billion) between 2025-26 and 2028-29. The OBR calculates that a 5 per cent larger rise in spending on branded medicines over the Spending Review would cost £0.7 billion by 2028-29.

The UK Government will extend VAT to some sugary milk drinks and increase taxes on online gambling. This may have an impact on public health, although this is not clear at this stage. 

Resource Departmental Expenditure Limits (DEL) excluding depreciation

Capital Departmental Expenditure Limits (DEL)

Source: HM Treasury, Public Spending Statistics for 2024-25 outturn, HM Treasury DEL plans.

Analysis  

There was little new for health in this fiscal statement for the first time in recent memory. This is to be expected given the UK Government delivered its three-year spending review in June which set out three-year department budgets from 2026/27. The two biggest health announcements were the new PPP model for neighbourhood health centres and an increase in tech capital funding. 

At the NHS Confederation, we have spent the past two years calling on the UK Government to lift the ban on private finance and develop new models that learn the lessons of the private finance initiative to address the country’s large capital deficit. 

This is why we were particularly pleased to see the government’s announcement that they will use a new on-balance sheet PPP solution for a large proportion of the neighbourhood health centres in England. We want the UK Government to go further and faster and allow for a wider range of PPPs, bringing in private investment that otherwise would have gone elsewhere, while learning the lessons from 25 years of PFI. 

More generally, we think the creation of a Neighbourhood Health Service in England has the potential to empower the NHS to deliver even more patient-first, joined-up care.

Working in partnership with local authorities, the VCSE sector and other partners is key to maximising the impact of these services, so it is welcome that the UK Government is committed to ensuring local leaders have the flexibility to shape services to meet the specific needs of their communities. Bringing teams together under one roof can significantly improve services for the public and patients and provide more cohesive relationships between health and care professionals.

Innovative use of existing estate across the whole of the NHS as well as local authorities, with the potential for new private sector investment, will support the delivery of neighbourhood services and ensure patients can access them more easily closer to home. 

Questions remain on the shape and timing of the PPP arrangements, and we will be working closely with central agencies to ensure this works well for members. 

The technology capital is intended to deliver a 2 per cent productivity growth each year of the Spending Review period. However, the initial announcement focuses predominantly on already approved programmes rather than new initiatives. For example, funding is directed towards the Future Workforce Solution, which will replace the current Electronic Staff Record system, and the continued rollout of the Federated Data Platform across the whole of the NHS.

While the capital investment is new, its scope is limited and signals further ring-fencing. There is insufficient detail on how funds will be allocated to emerging priorities or critical gaps. Without clear visibility, it is difficult to determine whether this investment addresses essential areas such as interoperability, cybersecurity, and digital inclusion, or structural constraints to NHS digital transformation including fragmented governance across integrated care systems and trusts, legacy systems that are costly and difficult to integrate, and significant workforce digital skills gaps that could undermine adoption of new platforms. These systemic issues risk slowing progress and reducing the impact of the investment and thus achieving the intended productivity growth.

The UK Government has also confirmed that money for redundancies in both ICBs and NHS England and other arm’s-length bodies can be brought forward from the Department of Health and Social Care’s budget. We welcomed this development but will continue to keep a close eye on how the savings assumed in this switch come about. 

Similarly, looking further ahead, the Office for Budget Responsibility highlighted the ongoing risks from the highly uncertain future industrial action in England and an increase in how much future drug prices might have on the NHS budget. They estimate the July and November five-day resident doctors’ strikes cost £0.5 billion, and there is a risk of further strikes. In addition, there is a risk of higher spending on drugs depending on the outcome of negotiations over branded medicines. 

The Spending Review assumed that spending on branded medicines (around 7 per cent of NHS RDEL) would rise by 25 per cent (£3.3 billion) between 2025-26 and 2028-29. A 5 per cent larger rise in spending on branded medicines over the Spending Review would cost £0.7 billion by 2028-29. It’s important to note that these figures are unclear and projections are more subject to change the further they are in the future. 

How we are supporting members

Our strategic policy team leads our work on NHS finance, and we will now shift our focus towards what the neighbourhood health centre PPP model should look like and how members want it implemented. We welcome members’ input: please contact Jonathan.barron@nhsconfed.org. 

Through our System Productivity Forum, we are convening members across all sectors and roles to learn from each other, sharing best practice and influencing policymaking on productivity. 

Our dedicated Health Economic Partnerships team looks forward to continuing its support for local areas as we transition to a more integrated neighbourhood approach of supporting people to live healthier and more prosperous lives.

Our external affairs team will continue to raise the unanswered questions and concerns arising from the Budget in parliament as MPs debate its content over the coming days. This includes in relation to the £16 billion capital backlog in England, as well as what assessment the UK Government has made of the impact of rising drug prices and possible further industrial action so that progress against the plan is not hindered. 

For further information about our influencing activity, please email externalaffairs@nhsconfed.org.