The state of NHS finances 2024/25

This report examines the financial challenge facing NHS organisations in 2024/25.
Jonathan Barron

31 May 2024

Key points

  • The number one challenge facing NHS leaders and their staff is how they balance their books while protecting patient safety given many organisations are having to achieve significant efficiency savings.  

  • A comprehensive survey of NHS leaders carried out by the NHS Confederation shows that many NHS organisations are having to meet high efficiency targets of 5 per cent and beyond, with some as high as 11 per cent. This is the tightest financial position NHS organisations have faced in years.

  • More than six in ten (61 per cent) of NHS leaders say they will need top-up funding from the government within the year to have a chance of hitting their efficiency targets. 

  • This would mean some end the year in deficit against their plans, much like many did in 2023/24. The NHS Confederation has consistently said that this type of ‘boom and bust’ planning hinders NHS leaders’ ability to plan services and represents poor value for money. 

  • The main ways NHS leaders say they will reduce spending is by cutting spending on agency, locums and/or bank staff, as well as freezing vacancies. There is a dissonance between the government’s plans to expand the NHS workforce over the next decade through the NHS Long Term Workforce Plan and what NHS organisations are having to do in the short term, which will result in posts being cut or frozen. 

  • Two thirds say that industrial action will continue to contribute to them not being able to meet their targets. We are now almost 18 months into the industrial dispute, with further strikes set for late June. The government needs to find a solution as this has become ‘business as usual’ for the NHS, with implications for reducing waiting lists and staff morale.  

  • As well as industrial action, the major barriers to improving productivity continue to be lack of capacity in social care and a lack of capital investment, as well as the likely impact of having to cut non-clinical staff who would otherwise play a key role in helping to reform services. More than six in ten (61 per cent) of NHS leaders said they cannot meet their current targets without further capital investment, while more than eight in ten say there needs to be a funding increase for social care. 


In March 2024 the Chancellor set out what was essentially a flat spending announcement for the NHS in 2024/25. This resulted in the NHS being given an extra £2.4 billion in revenue funding for the year. This is set against a background of ongoing industrial action that has already cost the NHS around £3 billion. 

The Institute for Fiscal Studies found that real-terms spending on the NHS had risen less quickly than was pledged at the last general election five years ago. This squeeze on NHS spending is likely to be compounded by the main political parties committing during the pre-election period to no further tax increases, which the IFS say will further constrain spending on public services. 

Adding to the challenge is the fact that many local health systems and organisations are still in the process of confirming their budgets and plans for the year. This followed the planning guidance for 2024/25 being delayed until 27 March, just days ahead of the new financial year. 

The NHS as a whole has been set an annual efficiency target of 2.2 per cent, despite many organisations starting the financial year in a worse underlying state due to industrial action and other cost pressures. The rate of NHS productivity growth has averaged 0.9 per cent over the past 25 years, with the NHS often delivering higher productivity improvements than the wider economy. However, some NHS organisations are facing up to higher efficiency savings, with  many NHS leaders tellng us privately that they will struggle to meet their efficiency targets in 2024/25. 

To assess how widespread this is, we have surveyed NHS leader opinion across all parts of the NHS on the state of finances and the challenges they face this year in balancing the books, improving performance against key targets, and protecting patient safety. 

Our survey was carried out in late April 2024 and early May and it went to NHS leaders in England working across NHS trusts, integrated care boards (ICBs) and primary care providers (figure 1). One hundred and ten leaders took part in the survey. 

Key findings

Efficiency and productivity savings

On average, NHS leaders say they are being asked to make efficiency and productivity savings of 6 per cent, with requirements ranging from 1.6 per cent all the way up to 11 per cent. More than half of ICB and NHS trust respondents predict that they will not meet their target (figure 2). Almost two thirds say they won’t be able to meet their target without more money from NHS England within the year (figure 3). 

Service delivery

Similarly, 57 per cent of primary care leaders surveyed say they aren’t confident that they will be able to meet their contracted service requirements (figure 4). 

The survey shows that the financial challenge is being felt across the country, not just by a handful of struggling organisations. This is a widespread and systemic challenge and underlines the difficult position that the NHS is in. 

"Our financial position is really difficult. We're expected to make very substantial efficiency savings, larger than the NHS has ever achieved, at the same time as facing extraordinary levels of demand.” NHS trust chair

“For the last few months my practice has had to use its overdraft each month to aid cash flow. Minimum wage has increased. Practice expenses have increased. Staff costs expected to rise this year and we won’t replace a nurse who is relocating. PCN practices are all constrained by finances. Planning extended access has been challenging.” PCN leader

Industrial action

One example of this pressure is industrial action. We have been warning of the financial impact of the unprecedented industrial action for 18 months. NHS England’s own figures say that last year’s industrial action cost the NHS at least £3 billion when you also factor in the loss of income from elective activity that hasn’t been delivered. 

Therefore, it’s no surprise that two thirds of respondents from NHS trusts and ICBs said that further industrial action will hinder their ability to meet their efficiency target this year (figure 5). 

How will NHS organisations meet the set targets?

Meeting these tough efficiency targets means making cuts somewhere. The most common ways NHS leaders will attempt to do this is via reducing spend on agency and bank staff; freezing vacancies/cutting jobs; and delivering care more efficiently/redesigning services (figure 6). 

Reducing staffing levels

Most worrying for attempts to reduce the historic backlog, 67 per cent of NHS trusts and ICBs plan on reducing clinical staff to meet their efficiency targets and 90 per cent plan to reduce non-clinical staff too (figure 7). While often the first targets for cuts, non-clinical staff are essential for undertaking the administrative work that would otherwise fall on clinical staff. Similar figures can be seen in primary care: 75 per cent say they will have to reduce clinical staff and 79 per cent plan on reducing non-clinical staff (figure 8). 

Staffing decreases are even more stark when we consider the NHS Long Term Workforce Plan, which describes the need for a major increase and investment in the total number of NHS staff. The plans from survey respondents and the associated assumptions about efficiencies show a dissonance between the workforce plan, which is predicated on expanding workforce numbers, and the short-term imperative to freeze and cut posts to save money. There is also a conflict between government directives to NHS organisations to increase use of the private and independent sector to help reduce waiting lists, while at the same time ICBs and trusts are being asked to reduce their costs.  

“I do not believe that it is possible for us to deliver all our financial, performance, workforce and quality/safety requirements next year - something has to give.” NHS trust chief executive

Capital investment and social care

More than six in ten (61 per cent) of ICBs and NHS trusts surveyed feel that they cannot meet their current targets without further capital investment, and more than eight in ten say there needs to be a funding increase for social care (figure 9). The NHS Confederation is calling for an increase in the NHS capital budget of at least £6.4 billion per year at the next Spending Review, as well as a long-term workforce plan for social care that mirrors the plan for the NHS. 

“We have a very serious need to invest in neighbourhood hubs. We have no void space, we have no hub-like facilities, we have a new hospital build to accommodate with lower capacity, that requires increased out-of-hospital capacity. We have a population growth close to 2 per cent per year. Plus the normal national increases in patient demands and contract demands. And we have 25 per cent of our general practices at risk of closure in the next five years, half of whom would take their premises with them.” PCN leader

While NHS leaders recognise the tight economic circumstances the country is in, the past few years have taught us that far too ambitious fiscal plans make little sense once they hit the reality of running a frontline NHS organisation. Planning services and funding in this short-term way is not an efficient use of taxpayers’ money. 

“Pressures at the front line are immense - paradoxically we have many patients who are medically fit on the wards who could be cared for elsewhere. If this was sorted. Every single ED patient could have a bed every day, with another 20-30 to spare (from our data locally). Investing in social care is the single most efficient way to help the NHS.” NHS trust chief executive

Conclusion: What do NHS leaders need?

The findings from this survey outline the scale of the financial challenge facing NHS organisations in 2024/25, but leaders are clear about where some of the key solutions lie. 

NHS leaders are delivering productivity improvements and want to do more, but it often requires capital investment – something that’s been insufficient for decades – and it also takes time. What we continue to see is NHS leaders being asked to make short-term cuts that will have a negative impact on their ability to improve productivity in the long term. 

NHS leaders and their staff are being required to make substantial savings in the space of a few months. Doing so undermines their attempts to address productivity issues in a strategic way around a plan as they often end up having to make cuts to balance the books in the short term. A long-term and more strategic approach to planning is urgently needed if the NHS is to move away from the ‘boom and bust’ cycle that it is experiencing.  

We’ve similarly been calling for a long-term solution to social care. Too often the NHS is unable to discharge patients because there isn’t enough space for them in community care settings. This hinders NHS productivity as they cannot treat other patients while patients who are medically fit to be discharged remain on wards.