5th Report - NHS financial sustainability

Select Committee
Public Accounts Committee HC 350 29 January 2025
Report Status Government responded
Conclusions & Recommendations 26 items (3 recs)
Source View on Parliament website
Government Response (AI assessment · 26 of 26 classified)
Accepted 11
Acknowledged 5
Deferred 8
Rejected 2
Government response
Treasury minutes: Government response to the Committee of Public Accounts on the Fifth report from Session 2024-25 · published 16 May 2025
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Recommendations & Conclusions

26 results
2 Conclusion Accepted
DHSC and NHSE show lack of readiness for radical, long-term NHS financial transformation.
Conclusion
Despite having last published a plan in January 2019, and the major disruption caused by Covid to the NHS since, DHSC and NHSE are yet to recognise the scale of transformation needed to make the NHS financially sustainable. The Government’s … Read more
Government Response Summary
The government welcomes the decision against capital-to-revenue switches and states record capital investment is agreed for 2025-26. It commits that every provider has been sent a bespoke pack for productivity opportunities for 2025-26, and a plan for 2026-27 will be set out after the Spending Review.
HM Treasury
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3 Recommendation Accepted
Set out detailed plan for unprecedented NHS productivity gains, addressing staff retention.
Recommendation
NHSE displays a remarkable complacency about the realisation of future NHS productivity improvements, which, if achieved, would be unprecedented. According to official ONS measures, long-term productivity gains in the NHS averaged 0.6% a year over the period 1996–97 to 2018–19. … Read more
Government Response Summary
The government agrees, detailing actions including training over 20,000 NHS managers and clinicians, supporting the National Retention Programme, deploying Electronic Patient Record systems and the NHS App, shifting care to community settings, and aiming to save £1bn by 2029 through biosimilar medicines uptake. Additionally, providers received 2025-26 productivity packs, and future plans will follow the Spending Review.
HM Treasury
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4 Recommendation Accepted
Review NHSE payment systems and processes to incentivise local systems supporting hard-to-reach patients.
Recommendation
In some cases, NHSE’s payment mechanisms can mean that local systems do not receive financial recognition when they prioritise hard-to-reach patients. GP surgeries receive a payment for every child vaccination. This vaccination funding mechanism favours areas where parents are more … Read more
Government Response Summary
The government agrees and states that NHS England regularly reviews and updates funding formulas, committing to do so again before 2026-27 allocations to ensure greater deprivation receives higher funding. It also cites existing programmes like Targeted Lung Health Checks and Mental Health Support Teams as evidence of reaching those most in need.
HM Treasury
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5 Recommendation Deferred
Define government health prevention spending and increase flexible funding for local systems.
Recommendation
Given the constraints on public spending, it is highly likely that re- focusing attention from sickness to prevention cannot be achieved without re-allocating existing NHS funds in the same direction. Senior ICB leaders report a continued lack of progress with … Read more
Government Response Summary
The government is considering defining health prevention spending, deferring to the upcoming 10 Year Health Plan and Spending Review Phase 2. It notes that 2025-26 planning guidance has removed many ringfences for local flexibility and NHS England will soon publish a revised oversight framework.
HM Treasury
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6 Conclusion Deferred
Ensure greater NHSE funding for community services, preventing redirection to hospitals.
Conclusion
NHSE’s long-held ambition to move more care from hospitals to the community has stalled. There would have been more investment and progress in mental health and community services, particularly GP surgeries and dental services, in 2023–24 had NHSE not redirected … Read more
Government Response Summary
The government is considering the recommendation, stating it will be addressed within the 10 Year Health Plan and multi-year Spending Review for decisions on shifting funding to community care. It highlights increased mental health spending in 2023-24 and the maintenance of Better Care Fund funding in 2025-26.
HM Treasury
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7 Conclusion Rejected
Publish plans to reduce NHS paper reliance and set deadline to end fax machines.
Conclusion
Despite ambitions to improve productivity through the introduction of new technologies, the switch to digital in parts of the NHS has been glacially slow. Digital and technological improvements could have a transformative effect on the NHS. However, NHSE’s investment in … Read more
Government Response Summary
The government disagrees with the recommendation, arguing against providers being 'fully paperless' due to digital inclusion considerations. It reports that 91% of secondary care trusts have Electronic Patient Records, forecast to reach 96% by March 2026, and fax machines will be unusable by 2027 due to analogue switch-off.
HM Treasury
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1 Conclusion Deferred
Committee scrutinised NHS financial management and sustainability with key departments.
Conclusion
On the basis of a report by the Comptroller and Auditor General, we took evidence from the Department of Health and Social Care (DHSC), NHS England (NHSE), and HM Treasury (HMT) on the financial management and financial sustainability of the … Read more
Government Response Summary
The government states it is working with NHS England to publish planning guidance earlier and aims to improve the planning process for future years. It defers further consideration of this recommendation to the upcoming 10 Year Health Plan.
HM Treasury
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8 Conclusion Accepted
DHSC attributed unpredictable 2024-25 budget-setting to external shocks and high inflation.
Conclusion
DHSC also noted that 2024–25 had been especially complicated due to ‘external shocks’ and, in particular, very high rates of inflation which made budget-setting very unpredictable.11 It accepted that it was preferable to give longer for local systems to plan … Read more
Government Response Summary
The government will work to enable planning guidance to be published well in advance of the financial year, and NHSE is working with ICBs to have full plans developed before the start of the 2025-26 financial year.
HM Treasury
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9 Conclusion Accepted
Discrepant budget timings impede joint strategic planning between local authorities and NHS bodies.
Conclusion
We asked how local authorities and NHS bodies could be expected to work together and deliver a joint strategy when local authorities receive provisional budgets in December, and final ones by February, but NHS 8 C&AG’s Report, paras 1.6 and … Read more
Government Response Summary
The government agrees with the Committee’s recommendation and will continue to work together and with HM Treasury to improve the planning process and ensure timely publication of guidance to the system, and earlier agreement of priorities and financial allocations for future years, with a target implementation date of December 2025.
HM Treasury
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10 Conclusion Acknowledged
NHS systems recorded doubled deficit despite significant additional government funding in 2023-24.
Conclusion
NHSE received significant extra funding from the government during the course of 2023–24. This included £2.8 billion to support new pay deals for staff, and £1.7 billion to mitigate the impact of industrial action. Despite this extra money, NHS systems … Read more
Government Response Summary
NHS England and DHSC continue to work together to enable planning guidance to be published well in advance of the start of the financial year, and ideally before Christmas.
HM Treasury
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11 Conclusion Accepted
NHSE confident in future pandemic funding, but highlights workforce capacity as main concern.
Conclusion
Resilience to shocks is a key element of financial sustainability. We asked how well the NHS would cope financially in the event of another pandemic. NHSE expressed confidence that in the event of another pandemic government would provide any additional … Read more
Government Response Summary
The government agrees with the recommendation, stating that new fiscal rules mean no further capital-to-revenue transfers will be used, and commits to a record £13.6 billion capital investment into health for 2025-26.
HM Treasury
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12 Conclusion Acknowledged
DHSC consistently diverted NHS capital funds to revenue, despite new fiscal rules.
Conclusion
Demand for capital in the NHS continues to outstrip supply and the UK lags behind other OECD countries in terms of capital investment in its health system. DHSC has maintained its recent track record of not fully investing the capital … Read more
Government Response Summary
The government stated that the fiscal rules set out by the Chancellor at the Autumn Budget 2024 mean that no further capital-to-revenue transfers will be used, and the department welcomes this decision. In 2025-26, a budget of £13.6 billion for health capital investment has been agreed.
HM Treasury
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13 Conclusion Acknowledged
DHSC acknowledges long-term healthcare shifts but prioritises immediate acute service pressures.
Conclusion
DHSC and NHSE told us that they were fully supportive of the new government’s aims to shift healthcare spending from treatment towards prevention, from hospitals to the community, and from analogue to digital. However, DHSC contended that these shifts would … Read more
Government Response Summary
The government states that the financial position of NHS providers is significantly improved and that the 10 Year Health Plan will consider how to build a prevention-focused health system, shift the balance of care to community settings, and maximize the impact of digital technology.
HM Treasury
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14 Conclusion Acknowledged
NHS productivity remains below pre-pandemic levels; future targets are significantly ambitious and challenging.
Conclusion
According to official ONS measures, long-term productivity gains in the NHS averaged 0.6% a year over the period 1996–97 to 2018–19. But productivity subsequently fell, both before and during the pandemic, and has yet to recover fully. In March 2024, … Read more
Government Response Summary
The NHS is working hard to recover lost productivity caused by the Covid-19 pandemic, NHS productivity continues to recover and to support this NHSE are focused on increasing clinical and operational productivity, improving staff retention, technology-enabled transformation, moving care to the right setting and improving prevention and maximizing the value of our spending.
HM Treasury
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15 Conclusion Accepted
Complex patient needs, longer hospital stays, and staff sickness impede NHS productivity recovery.
Conclusion
We asked witnesses why NHS productivity continues to be lower than before the pandemic. NHSE told us the NHS currently has 19% more staff compared to before the pandemic but is only seeing 14% more patients. It named several factors … Read more
Government Response Summary
The government states that the NHS is working to recover lost productivity, with recent data showing improvement and ongoing efforts focused on clinical productivity, workforce retention, technology, care setting optimization, and maximizing spending value; bespoke packs identifying opportunities have been sent to providers.
HM Treasury
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16 Conclusion Acknowledged
NHSE confident in technology for productivity gains, but current metrics inadequately measure improvements.
Conclusion
We challenged NHSE on what it would do differently to achieve the ambitious annual productivity improvements it has committed to. NHSE told us annual productivity improvements were currently running at about 1.8% and it was confident that the annual gains … Read more
Government Response Summary
The NHS is working hard to recover lost productivity caused by the Covid-19 pandemic, NHS productivity continues to recover and to support this NHSE are focused on increasing clinical and operational productivity, improving staff retention, technology-enabled transformation, moving care to the right setting and improving prevention and maximizing the value of our spending.
HM Treasury
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17 Conclusion Accepted
NHS funding mechanisms create perverse incentives, disadvantaging deprived areas for childhood vaccinations.
Conclusion
We asked about the equity of NHS funding mechanisms and the risk of perverse incentives, using as an example the distribution of money for childhood inoculations. GP surgeries receive a payment for every child that gets a vaccine.29 In our … Read more
Government Response Summary
The government states that NHS funding allocations already account for deprivation and health inequalities, and that NHSE regularly reviews the formula used to set allocations, noting evidence that NHSE investment is reaching those most in need.
HM Treasury
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18 Conclusion Accepted
NHSE relies on local partners to reach harder-to-reach communities for health initiatives.
Conclusion
NHSE informed us that it relies on primary care networks working with their local ICBs to identify harder to reach cohorts. It accepted that local authorities often have better links into communities than NHS bodies. It said many lessons were … Read more
Government Response Summary
The government states that NHS funding allocations already account for deprivation and health inequalities, and that NHSE regularly reviews the formula used to set allocations, noting evidence that NHSE investment is reaching those most in need.
HM Treasury
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19 Conclusion Deferred
Government aims for three NHS shifts, balancing long-term transformation with current patient care.
Conclusion
DHSC described how the new government had set out three shifts that they want to see in the NHS: from analogue to digital; from treatment to prevention; and from acute to community. DHSC said that it wanted “to see those … Read more
Government Response Summary
The government is considering measures for supporting the prevention shift in the context of the work of the 10 Year Health Plan and does not wish to pre-empt the content, but will consider defining health prevention spend as an enabler and will notify the Committee of the response when it is confirmed.
HM Treasury
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20 Conclusion Deferred
Progress on health prevention hindered by acute care focus and reduced public health grants.
Conclusion
Senior ICB leaders reported to the National Audit Office a continued lack of progress with the government’s long-standing aim to move towards preventing ill health rather than treating it. One of the most important reasons cited by ICBs has been … Read more
Government Response Summary
The government states that measures for supporting the prevention shift are being considered in context of the work of the 10 Year Health Plan.
HM Treasury
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21 Conclusion Deferred
DHSC believes prevention requires cultural and legislative change, not solely additional resource allocation.
Conclusion
DHSC told us it did not view providing more resources, or redirecting them from elsewhere, as a substantive part of the solution to the lack of progress with prevention. Instead, it considers that a shift towards prevention might be achieved … Read more
Government Response Summary
The government is considering measures for supporting the prevention shift in the context of the work of the 10 Year Health Plan and does not wish to pre-empt the content, but will consider defining health prevention spend as an enabler and will notify the Committee of the response when it is confirmed.
HM Treasury
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22 Conclusion Deferred
Inadequate definition and tracking of prevention spending impedes accurate assessment of policy progress.
Conclusion
Currently, NHSE does not even track spend and activity on prevention by ICBs at local levels, due to unavailability of data and the lack of consistency about what counts as prevention spending. While DHSC funds some prevention activities that sit … Read more
Government Response Summary
The government states that defining health prevention spend could enable a shift from sickness to prevention, and that this recommendation will be considered in the context of developing the 10 Year Health Plan.
HM Treasury
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23 Conclusion Accepted
NHSE's top-down guidance significantly hinders local health systems' intended resource allocation autonomy.
Conclusion
Local areas would value more flexibility about where they can direct their resources to achieve greatest impact, including how they fund measures to prevent ill health. ICBs were supposed to have greater autonomy in determining how to allocate resources locally … Read more
Government Response Summary
The department and NHSE recently announced changes to the NHS operating model to move power from the health centre to local leaders. 2025-26 Operational Planning Guidance removed many ringfences, giving local systems greater control and flexibility over how funding is deployed to best meet the needs of their population. NHSE will soon publish a revised NHS oversight framework that will reward those ICBs and providers that are doing well with greater financial freedoms and flexibilities. ICSs already have a duty to base their integrated care strategies upon local joint strategic needs assessments.
HM Treasury
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24 Conclusion Deferred
Overall NHS productivity remains low despite increased elective activity and community investments.
Conclusion
Despite carrying out 15% more elective activity than before the pandemic, the NHS is less productive overall once the activities of mental health trusts, community trusts and GPs are considered.42 NHSE told us that, while government has had a long-term … Read more
Government Response Summary
NHSE, with DHSC, is focusing on enabling a greater shift from hospital to community – including considering how funding decisions over coming years can support this through the 10 Year Health Plan and the multi-year Spending Review. This recommendation is therefore under consideration and The Committee will be notified of the response when it is confirmed.
HM Treasury
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25 Conclusion Accepted
NHSE's needed capital investment in technology is diverted to mitigate ICB spending deficits.
Conclusion
NHSE assesses that sustained increases in capital investment are needed to replace ageing equipment, expand capacity to meet demand, and enable staff to benefit from new technologies.48 However, NHSE told us its investment in technology between 2022–23 and 2024–25 could … Read more
Government Response Summary
The government agrees that sustained increases in capital investment are needed, states that no further capital-to-revenue transfers will be used due to fiscal rules, and highlights that a record £13.6 billion has been agreed for capital investment in health for 2025-26.
HM Treasury
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26 Conclusion Rejected
NHS still lacks consistent data infrastructure and technological maturity, delaying productivity gains.
Conclusion
We asked what was being done to improve productivity through the use of new technologies. NHSE told us the NHS currently lacks a consistent data infrastructure and that NHS providers varied in terms of their levels of technological maturity.50 NHSE … Read more
Government Response Summary
The government disagrees that providers should be fully paperless, stating that some patient communications must be sent by letter and outlines investment in national IT systems, EPRs and the NHS app.
HM Treasury
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