Rachel Reeves has rebuffed a plea from Wes Streeting for an emergency injection of £1bn into the NHS’s budget to cover the cost of mass redundancies.
The chancellor’s decision is a setback for the health secretary, who had been lobbying behind the scenes in Whitehall for extra money to pay off 18,000 personnel who are losing their jobs.
The Treasury has instead allowed the Department of Health and Social Care (DHSC) to overspend its allotted budget by about £1bn this financial year. But this is on the understanding that it will have less money in 2026-27 – and no new cash overall.
Streeting had spent months trying to persuade the Treasury to grant additional funding to enable the NHS’s 42 integrated care boards to start slimming down their role. They have been asked to make about half their 25,000 staff redundant.
The £1bn is needed to let the boards finally shrink their workforces – a process that had been due to finish by the end of December. It also covers payoffs to an unknown number of employees at NHS England, which is being abolished and merged with the DHSC in 2027.
The process had ground to a halt amid disagreement over who should foot the bill for the redundancies. The job losses are part of a radical restructuring of the health service in England which Streeting had ruled out when Labour was in opposition.
NHS bosses in England last month told ministers they needed £3bn more this year to cover the cost of redundancies, strikes by resident doctors – five days of industrial action start this Friday – and rises in drug prices. All three were unforeseen when the NHS’s budget for this year was set, they argued.
Sources say the Treasury offered to make a deal with the DHSC in which it would provide extra money for redundancies if the department agreed to absorb the cost of higher drug prices.
However, no agreement was reached, with the extra costs of medicines likely to prove significant.
Streeting will confirm that the care board redundancy programme is at last beginning when he addresses the annual conference of NHS Providers in Manchester on Wednesday.
He will tell the hospitals group that the abolition of “18,000 administrative posts” in care boards is part of a process of “stripping away endless red tape and bureaucracy” that will save the NHS £1bn a year by 2029.
The DHSC confirmed that “funding arrangements have been agreed with HM Treasury and will be from within the existing funding settlement”.
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NHS services would be protected, it added, saying: “We will not be cutting any investment to the NHS, frontline or backroom.”
Jim Mackey, NHS England’s chief executive, said: “This is good news for NHS staff and patients, allowing our organisations to move forward and provide greater certainty about the future for all our staff and leaders.”
Jon Restell of Managers in Partnership, a union that represents many NHS bosses, said: “Today’s redundancy funding announcement ends months of inaction by the government which have caused avoidable distress to our members as working people and placed care board leaders in an intolerable position.
“The fate of important care board functions, such as continuing healthcare, remains uncertain and managers with digital and planning expertise will be sacked, undermining the government’s own 10-year health plan.”
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