NHS England is reportedly pushing trusts to bolster financial sustainability by sharply reducing reliance on national deficit funding and meeting heightened cost improvement goals, which trusts face against an already demanding backdrop. In 2025, most trusts aimed for Cost Improvement Programmes (CIPs) of around 6%. This level, trusts already recognised, challenged them to achieve it without major service redesign, workforce changes, or cuts to non-urgent activity, leading many to rely on one-off savings. Furthermore, for 2026/27, NHS England expects trusts to move toward breakeven. Trusts must reduce the central deficit support, the national support funding that has underpinned many trust budgets, as they absorb more structural shortfalls internally.
The published NHS planning guidance for 2025/26 already includes an efficiency expectation of approximately 2% embedded in tariff prices, and this expectation will persist into the following year. When trusts combine this with the anticipated push to reduce deficits by roughly 2% of income (to lessen central reliance), the total financial expectation equates to a more aggressive real-terms squeeze. Many senior leaders argue this risks destabilising services if they do not adequately resource the system to manage demand growth.
This shift occurs amid a challenging economic climate. Constraints on public spending and inflation pressures limit the scope for substantial headline uplifts in NHS budgets in the 2026 Spending Review. Treasury officials have indicated that broader health expenditure must operate within public sector resource control totals, forcing the Department of Health & Social Care to exceed previous productivity assumptions just to maintain current service levels.
Chief finance officers are already highlighting significant risks in board discussions, including rising agency costs, wage inflation, backlog-related demand, and capital constraints. These factors make the urgent task of service redesign for efficiency difficult to deliver sustainably, especially as recurring savings prove harder to find than temporary spending reductions. The national drive to reduce deficits fundamentally roots itself in NHS England’s desire to cut the dependency on national support funding mechanisms (like revenue support grants), which historically supported trusts with large accumulated deficits. While NHS England believes this will encourage stronger local financial ownership, trusts caution that the absence of underlying real income growth will necessitate tough choices concerning services and staffing.
NHS Providers has repeatedly called for funding assumptions that realistically account for workforce costs, demand growth, and non-pay inflation. They argue that unrealistic efficiency targets paired with deficit reduction goals could lead to undeliverable financial plans or cuts to frontline care. The likely consequence of sustained real-terms cuts and heightened deficit targets will worsen operational performance, compounding existing pressures seen in A&E waits, delayed transfers of care, and elective backlogs.
For 2026, policy watchers agree that the government and NHS England will face the key challenge of successfully balancing financial sustainability with service quality. If NHS England does not manage the push to tighten deficits and efficiency carefully, it risks translating into constrained capacity and forcing extremely difficult choices upon frontline leaders. The 2026/27 financial plans trusts develop may well determine the NHS’s operational and financial path for the remainder of the decade.
