Autumn Budget 2024: what you need to know

Overview

• The Chancellor has delivered a one-year budget (termed Phase 1) setting out both an updated 2024/25 spend and next year’s planned funding. A longer-term Spending Review will follow in the ‘late spring’ (called Phase 2). 
• The health and social care revenue budget will increase to £200.5 billion in 2025/26 and its ring-fenced sub-budget for NHS England will increase to £192 billion. The NHS England increases are frontloaded to help fund pay deals and other immediate cost pressures, as shown in table 1.  ¹  

Table 1. RDEL spending total by department

Source: OBR economic and fiscal outlook October 2024, chapter 6

The Health and Social Care capital budget will increase to £13.6 billion in 2025/26 as shown in table 2:

Table 2. CDEL spending total by department

Source: OBR economic and fiscal outlook October 2024, chapter 3

• The Budget set out certain capital projects that this increase will fund:
  • Labour’s manifesto pledge of 40,000 extra operations and acute sector appointments a week
  • £1.5 billion for capital for new surgical hubs and scanners and new beds to create more treatment space in emergency departments, reduce waiting times and help shift more care into the community 
  • £70 million for radiotherapy machines to improve cancer treatment
  • £2 billion to invest in NHS technology and digital – contingent on 2 per cent productivity next year 
  • dedicated fund to deliver around 200 upgrades to GP surgeries
  • £26 million to open new mental health crisis centres
  • fixing RAAC hospitals. 
• The Chancellor has changed the fiscal rules to allow more borrowing to invest through a measure called ‘public sector net financial liabilities’ allowing a ‘headroom of circa £50 billion. We expect this to allow for higher NHS capital budgets in the coming years. 
• All departments are subject to a 2 per cent efficiency, productivity and savings target in 2025/26 which is expected to make significant savings. The Budget announces a new Public Sector Reform and Innovation Fund, to support the development of a new approach to improving public services. The Budget allocates £165 million of this to a range of projects in 2025/26, including to support foster carer recruitment and planning reform.
• The government will create a National Data Library to unlock the full value of public data assets. This will provide simple, ethical and secure access to public data assets, enabling researchers and businesses to develop powerful insights that will drive growth and transform people’s quality of life through better public services and cutting-edge innovation, including AI.
• The Budget protects core research and development budgets, with a real-terms increase in funding for the National Institute for Health and Care Research to support the NHS and wider health and care system in driving a revolution in research, life sciences, med-tech and data. 
• The government will task the government Chief Scientific Adviser, Professor Dame Angela McLean, with National Technology Adviser, Dr Dave Smith, to lead a review on barriers to the adoption of transformative technologies that could enhance innovation and productivity
• The Budget also set out the following relevant non-health announcements:
  • The National Living Wage will rise by 6.7 per cent to £12.21.
  • Employers’ National Insurance contributions will go up by 1.2 percentage points to 15 per cent and reduce the threshold for when employers pay to £5000 from April 1, 2025. 
  • An increase in tobacco duties and the soft drinks industry levy. From 1 October 2026 this will also be a new vaping products duty. 
  • An increase in alcohol duty in line with inflation and a cut on alcohol duty on draught products from February 2025. 
  • An estimated real-terms increase of 3.2 per cent in core local government funding in 2025/26 as well £1.3 billion of new grant funding, £600 million of which will be allocated to social care.
  • An uplift of £1 billion for special educational needs and disabilities (SEND) provision and alternative educational provision funding. 
  • £240 million to trial new ways of getting people back to work 

  • £2 billion for health R&D to drive innovation and support the UK’s leading life sciences sector.

  • £11.8 billion has been allocated to compensate those infected and affected by the infected blood scandal. 
  • A Covid Corruption Commissioner has been appointed to uncover COVID-19 era fraud. 

Political and financial context

The Chancellor announced a mini audit after she arrived in office, revealing £22 billion of in-year 2024/25 spending pressures in July. The government inherited a difficult set of spending plans from the previous government, although some of the £22 billion pressure came from the government’s own policies, most notably above-inflation public sector pay increases. Most importantly for the NHS, Chancellor Hunt’s spring Budget pencilled in public service spending of just 1 per cent per year from 2025/26, a situation unlikely to have happened. 

2024/25 is the final year of the three-year 2021 Spending Review (SR). One reason NHS finances have been stretched in the past 18 months is that the 2021SR’s spending limits became increasingly detached from reality. 

As the Institute for Fiscal Studies showed in its preview Green Budget, cumulative inflation over the three years covered by the last Spending Review is now forecast to be more than twice as high (15 per cent versus 7 per cent). 

Departments budgeted for pay awards of around 3 per cent, 2 per cent and 2 per cent in those three years; they turned out closer to 5 per cent, 6 per cent and 6 per cent.  ²  Had day-to-day funding grown at the rate originally planned, it would have been £10 billion higher in real terms in 2023/24 (even after the ad hoc top-ups to budgets for that year). On top of that, the UK population has grown by 1.8 million (2.7 per cent) since 2021/22, versus a forecast of 800,000 (1.1 per cent) in October 2021, which is a big pressure on the NHS budget. We will be making this point in our submission to the spring Spending Review where the Chancellor will set out departmental budgets for 2026/27 and 2027/28. 

Ahead of the Budget, the Chancellor trailed that she would amend the fiscal rules to allow more infrastructure spending over the course of the parliament. We have supported moves to think creatively and sensibly about how the government and the NHS can fund capital spending. She will be anxiously awaiting the reaction from bond markets given the market turbulence that followed Prime Minister Truss’ mini-budget in 2022. 

Poor transparency hampers our ability to understand how much money the NHS gets

In recent years it has become increasingly difficult for stakeholders and media to easily understand how much money the NHS has been given for a financial year. Budgets and Spending Reviews set out an overall health and social care ‘spending envelope’ through the Departmental Expenditure Limits (DEL). Since 2015, there has been a ring-fenced line-item underneath this ‘of which: NHS England’ meant to capture everything NHS England does. 

However, the number of things that NHS England is asked to do outside the ring-fenced budget has grown over the years (examples include COVID-19 vaccinations, the Elective Recovery Fund, and, most importantly, Health Education England), that it has become an increasing useless way of understanding how much money the NHS gets. The DHSC transfers parts of its non-ring-fenced budget that it keeps in reserve to NHS England to do this throughout the year. We don’t get an in-year update in the Budget documents for how much DHSC has given to NHS England. 

The way to understand that is to look at the DHSC NHS financial direction issued to NHS England just after the Spring Budget but before the start of the financial year. Here we can see that the Budget for the NHS going into 2024/25 was £176.9 billion and not the £164.9 billion outlined in the ring-fenced ‘of which NHS England’ line item in the Spring Budget.  

It’s here we can make best informed guesses about how much the NHS was given for all the various policy/emergency decisions throughout the year. You can see in table 7 on page 14 of the financial directions document how this has been calculated, including the somewhat opaquely described ‘Other transfers of funding following Spring Budget 2024’ of £4.6 billion, likely to cover industrial action, winter funding and the new pay deal. 

Frustratingly, the financial directions are not publicly updated throughout the year, or at least not consistently. In 2020 there were regular updates, not least because they needed to set out the multiple COVID-19 ringfences that HMT had set (for example that £1.2 billion could only be spent on hospital discharge; and £400 million only be spent on ventilators, etc). However, these updates have dried up and we are left to use occasional references in NHS board meetings to understand how much the in-year NHS budget has changed, either through new monies from HMT reserves or from DHSC to NHSE transfers. For example, October’s board meeting finance update said:

"The month 4 expenditure limit of £179.1 billion [up from the £176.9bn in the original Financial Direction] includes a number of additional funding streams recognised by the Department of Health and Social Care (DHSC) but not yet included in the published financial directions. The most significant of which being additional funding to support elective recovery and the COVID vaccination programme, additional funding for technology investment, and to cover the costs of industrial action." 

All this limits stakeholders’ ability to easily describe how much new money the NHS will see on Budget day. We continue to lobby the government for frequent, transparent updates on overall NHS funding in-year.

Analysis

Overall investment

Revenue limits

Throughout the election campaign we called for a 4 per cent real-terms increase in NHS England revenue funding, more in line with historical averages and as a step towards restoring services. The NHS England average increase of 4 per cent outlined here is therefore welcome but becomes more complex when looked at more closely. 

Firstly, the NHS England funding is frontloaded, with 4.7 per cent being given to the NHS this year. On the face of it this is a serious £10.4 billion increase from last year. However, when you consider that a large amount of this will go towards the above-inflation pay deals not accounted for in Spending Review 2021 (of which this year is the final one), it puts into perspective how much might go towards health leaders to improve care from the current baseline. 

We welcome the increases but remain committed to pushing for commensurate increases at next year’s Phase 2 Spending Review, as it will take several years to address waiting lists and meet Labour’s manifesto commitment

Secondly, next year’s budget increase – should it stay the same at next year’s Spending Review, and that’s not a given – will be 3.3 per cent, which is below the historic long-run average of 3.6 per cent. While that will include the baseline of the new spending deals, it is still asking a lot of a health service stretched by a decade and a half of historically low funding increases. 

Overall, we welcome the increases but remain committed to pushing for commensurate increases at next year’s Phase 2 Spending Review, as it will take several years to address waiting lists and meet Labour’s manifesto commitments. We also await further confirmation on whether the increases will be subject to the Mental Health Investment Standard. This may arrive as part of the updated interim mandate we expect from the Secretary of State shortly. 

Capital 

We have run a campaign over the past year calling for more than £6.4 billion in extra capital spending for the NHS and outlined how health leaders are keen to work with the government to find innovate ways to address this shortfall.

‘Robbing Peter to pay Paul’ is one symptom of a capital system that urgently needs reform to make sure that long overdue spending increases are spent well and on time

As such the £3.1 billion increase from 2023/24 to 2025/26 is a step in the right direction. But the capital budget is more complicated than it first appears. This £3.1 billion increase is based on the outturn of £10.5 billion in 2023/24, £500 million less than what was planned in Spring 2024. Some of this represents the difficulty of planning and spending on large projects which do not neatly fall within a given financial year. Some of this undoubtably comes from DHSC underspending and transferring capital budget to cover the resulting revenue shortfall. 

This ‘robbing Peter to pay Paul’ is one symptom of a capital system that urgently needs reform to make sure that long overdue spending increases are spent well and on time. Particularly good news is the Chancellor’s commitment to set out five-year capital windows at the Phase 2 in spring. Here we should also see more information about the revisited New Hospital Programme. We have long called for long-term planning windows and this should help health leaders better plan capital spending. 

We welcome the £2 billion announced specifically for digital and technology to support the ambition to move from analogue to digital for the NHS. The Darzi review correctly identified the modern digital challenge the NHS is faced with an outdated and legacy IT infrastructure. However, this amount is much less than the £3.4 billion announced by the previous government in spring 2024. To achieve a full 'tilt towards technology' and to boost productivity by means of digital transformation, a fully adequate and modern NHS is needed. 

Rise in employer national insurance contribution 

It appears that the government has made an allowance for public sector bodies when it has calculated the net impact of the new employer national insurance increase. However, we await further detail on the exact impact on NHS employers as this specific aspect was not explicit in today’s Budget documents.

However, this will have an impact on other providers of NHS care, including primary care members who are particularly concerned. The uplift will have come out general medical services’ core funding which has been uplifted only 2 per cent this year and has lagged inflation for the last five years. Primary care networks will also need to cover these increased costs which will require the Additional Roles Reimbursement Scheme fund to be uplifted or impact on delivery of services. This increase in national employer contributions risk accentuating the workforce crisis in primary care – unless more support is provided.  

Mental health

The government has committed an additional £26 million to open new mental health crisis centres, reducing pressure on A&E services, and to tackling the root causes of mental health problems and supporting people to remain in, return to and find work. Additional funding for mental health crisis support is welcome. Demand has risen dramatically, with referrals to very urgent mental health crisis teams 43 per cent higher in June 2024 than in June 2023. 

Tackling the root causes of mental health problems will be vital and requires a cross-government approach. Thus far this has not been committed to

Members tell us the implementation of Right Care Right Person is significantly impacting demand on crisis teams, as well as other parts of the mental health and ambulance sector, and this funding could be used to address that. Local areas must be given the flexibility to use the additional funding in the way that best meets the needs of their patients. For instance, there are existing successful models of mental health crisis centres, often run by VCSE organisations, that can be built on and expanded.

Tackling the root causes of mental health problems will be vital and requires a cross-government approach. Thus far this has not been committed to. However, the increases in National Living Wage and funding to reduce homelessness will be beneficial as poverty and insecure housing are significant drivers of poor mental health. The Budget also confirms funding for Young Futures Hubs will be held by the Home Office. It is vital the hubs are developed in partnership with DHSC and the VCSE sector, otherwise this will be a huge, missed opportunity to reduce demand for children and young people’s mental health services.

Improving population health 

The government has made a commitment to move from a model of treating sickness to prevention. The increase in the soft drinks levy will help tackle the key public health challenge of obesity and other harms caused by high sugar intake. Increases in tobacco duties as well as a new vaping products duty will support progress towards a smoke-free generation. 

We welcome the government’s commitment to implement further measures such as reviewing the current sugar thresholds and restricting junk food advertising on TV and online. Health leaders want to see the government go further and faster in addressing the drivers of ill-health to tackle rising demand and improve the health of the nation. 

Local government and adult social care 

The uplift to local government core funding for 2025/26 is a welcome step in the right direction after a decade of underfunding.The increase to local authority investment will bolster the role they play in promoting health and wellbeing in local areas and strengthen integrated care systems. We await further details on whether this increase will restore the public health grant to the real-terms equivalent of 2015/16 per person and tackle longstanding inequalities in grant allocation between local authorities.

Health leaders have warned that the lack of funding for social care is one of the biggest risks to the future sustainability of the health and care system

The government has also committed to a £1 billion uplift for SEND and alternative educational provision for children and young people. This is an important step towards reforming SEND provision. The funding is not directly for health, but many members provide direct support or work with local authority partners to develop and provide services for many vulnerable children, such as those with mental health needs, neurodiverse conditions and learning disabilities, who would be identified as having SEND.

The additional investment of £600 million in social care will provide much-needed support to the sector. But it not does not go far enough in tackling its longstanding underinvestment. In particular, the £1.1 billion that had previously been allocated to support the Dilnot reforms which have since been scrapped. Health leaders have warned that the lack of funding for social care is one of the biggest risks to the future sustainability of the health and care system. 

We welcome the government’s announcement of a rise in Carer Allowance’s earnings limit which will allow more carers, who are mostly women, to access much-needed support. 

New funding for work and health 

The government has committed £240 million of funding to trial new ways of getting people back to work. Further detail will be announced in the Department for Work and Pension’s Get Britain Working white paper next month, including detail on eight Trailblazer test sites that will bring together integrated work, health and skills services to support people who are inactive due to ill health to return to work. We welcome this in light of the finding shared in our recent report that since 2020, economic inactivity in the UK has risen by 900,000, with 85 per cent of the increase being people who are long-term sick.

We welcome the news that as part of the Trailblazers, three integrated care boards will be chosen as health and growth accelerators by NHS England to develop evidence of the impact of targeted action on the top health conditions driving economic inactivity. ICSs are uniquely placed to support collaboration across organisations in local areas to accelerate this work. We are working with NHS England to understand how the funding will build on WorkWell which went live in 15 ICBs from the start of October 2024. 

The government also announced £115 million in 2025/26 to deliver a new supported employment programme called Connect to Work. It will be delivered by clusters of local authorities working closely with the health service. Connect to Work complements the WorkWell programme by offering up to 12 months intensive employment support to disabled people, those with health conditions and those with other non-health complex barriers to employment.

We will continue to support members to understand the wider work and health landscape. 

Research and development 

We welcome the additional uplift to the to the budget of the National Institute for Health and Care Research (NIHR) as part of over £2 billion of R&D funding, supporting life sciences innovation and accelerating the delivery of the health and growth missions. Having a thriving UK life sciences sector is key to ensuring patients get access to the latest state-of-the-art medicines and medical technologies.

The Public Sector Decarbonisation Scheme is open to all public sector organisations and therefore it is not clear how this new funding will benefit the NHS specifically or sufficiently

The NHS is the world’s first health service to enshrine in law the commitment to achieving net zero by 2040. The announcement of £1 billion of funding over three years to fund hundreds of local energy schemes to help decarbonise the public estate through the Public Sector Decarbonisation Scheme is essential for the NHS to be able to access financial resource to meet its net zero ambition. However, the Public Sector Decarbonisation Scheme is open to all public sector organisations and therefore it is not clear how this new funding will benefit the NHS specifically or sufficiently.

Women and the economy 

That the government is committed to increasing women’s labour market participation is a welcome announcement. As our recent analysis underscores, women represent a disproportionate amount of those out of formal work and economically inactive, attributing the main cause of economic inactivity to long-term sickness. Moreover, while sickness absence rates have been on the rise for both women and men since 2020, they are 1 percentage point higher in women than in men. 

We hope to see a continuation of the commitment to women’s role in the economy through further investment in women’s health research and services

While we welcome the announcement that large employers will be required to take appropriate measures to support employees through the menopause, we encourage a more comprehensive and life-course approach to women’s health conditions in addition to the menopause alone. For instance, we found that the economic cost of absenteeism due to severe period pain and heavy periods alongside endometriosis, fibroids and ovarian cysts is estimated to be nearly £11 billion per annum. We therefore hope to see a continuation of this commitment to women’s role in the economy through further investment in women’s health research and services. 

Next steps

NHS capital

We have undertaken a year-long capital project that has so far looked at how much money the NHS needs and innovative ways the NHS can raise the necessary sums. Our next paper will focus on how to reform the capital spending process to give more freedom to health leaders and better value for money for taxpayers. 

Revenue

There remain several pressing concerns regarding the revenue settlement, including how much will go towards the pay deals. Part of this relates to the opaque and inconsistent process for understanding how much money DHSC gives to NHS England and when. We will continue to press the government to fix this. 

Spring Phase 2 Spending Review

We will submit an extended submission to the government for Phase 2 and will include member experience throughout. If you would like to be included please contact Jonathan Barron or Edward Jones.