How Does the UK Budget 2025 Affect NHS Staff?
Chancellor Rachel Reeves delivered the UK Budget 2025 on 26 November, setting out the Government's fiscal plans for the coming years. For NHS staff, the Budget brings a mix of confirmed pay settlements, workforce changes, and investment in technology and infrastructure. Here's what it means for those working in the health service.
Pay Awards Already Confirmed for 2025/26
NHS staff should note that pay awards for the current financial year were confirmed back in May 2025, before this Budget was announced. These remain in place:
- Agenda for Change staff (including nurses, paramedics, healthcare assistants, and allied health professionals) received a 3.6% pay rise, backdated to 1 April 2025
- Resident doctors (formerly junior doctors) received an average 5.4% increase (4% plus a £750 consolidated payment)
- Consultants and other senior medical staff received a 4% increase
- Very Senior Managers received 3.25%
The average starting salary for a nurse now sits at around £31,050, up from roughly £27,050 in 2023. For a full-time resident doctor, the average basic pay reached approximately £54,300 in 2025/26.
These pay awards were backdated to 1 April and paid in August 2025 salaries. The Government has committed to funding these increases by eliminating waste and low-value spending across the health sector, including by reducing Integrated Care Board costs by 50%.
National Living Wage Increase
From 1 April 2026, the National Living Wage will rise by 4.1% to £12.71 per hour for eligible workers aged 21 and over. This represents an increase of £900 to the gross annual earnings of a full-time worker. For NHS Band 2 staff, who are typically on or near the National Living Wage, this statutory increase ensures their pay remains compliant with minimum wage legislation.
The entry-level Band 2 hourly rate is £12.08, whilst Band 3 starts at £12.31. Earlier in 2025, these bands received specific uplifts to ensure they remained above the minimum wage threshold when it increased, separate from the main pay agreement.
National Insurance Changes: What They Mean for NHS Employers
Whilst the Budget 2025 did not introduce new changes to employer National Insurance for this year, it's worth noting that changes announced at Autumn Budget 2024 remain in effect. From April 2025, employers pay National Insurance at 15% (up from 13.8%), and the threshold at which employers start paying dropped from £9,100 to £5,000.
These increases place additional cost pressures on NHS organisations, though the Government has indicated that the NHS budget accounts for rising staffing costs. The Budget 2025 document confirms continued investment in the NHS, with funding protected to support workforce costs alongside efficiency targets.
Workforce Restructuring and Redundancies
One of the most significant workforce changes is the ongoing restructuring of NHS administration. The Budget confirmed that the Government is abolishing NHS England and significantly reducing Integrated Care Board (ICB) headcount and running costs.
Approximately 18,000 administrative staff and managers, including those on local health boards, are expected to be affected by redundancies. Funding for the estimated £1 billion one-off redundancy cost has been agreed, with the NHS permitted to overspend its budget this year to pay for these costs, which will be recouped over time.
The Government argues this will unlock savings of £1 billion per year by the end of the Parliament by reducing bureaucracy and duplication. These savings are intended to be reinvested into frontline services, with the Government stating that every £1 billion saved in bureaucracy costs is enough to fund an extra 116,000 hip and knee operations.
For frontline clinical staff, the Government has committed to eliminating the use of all agency staff by the end of the Parliament and reducing agency spend by at least 30% in the current financial year.
Investment in Technology and Infrastructure
The Budget announces £300 million of additional capital investment in NHS technology to boost productivity, support staff, and improve patient outcomes. This builds on the up to £10 billion announced at Spending Review 2025 for digital transformation by 2028/29.
Key technology investments include:
| Investment Area | Purpose |
|---|---|
| Single patient record | Seamless navigation and communication between primary and secondary care |
| NHS App expansion | Guiding patients to appropriate care pathways |
| Digital health records | Closing gaps in patient access across providers |
| Administrative automation | Tools to help staff reduce time on admin tasks |
For staff, this technology investment aims to reduce administrative burdens, allowing more time for direct patient care. The Budget document emphasises automation of administrative tasks as a key productivity driver.
Neighbourhood Health Centres
The Government is establishing 250 new Neighbourhood Health Centres across England, with 120 operational by 2030. These centres will co-locate local health services such as GPs, nurses, physiotherapists, and other healthcare professionals.
Early sites will open in Birmingham, Barrow-in-Furness, Truro, and Southall, building on successful models already operating in Hull and Barnsley. These centres will be delivered through the NHS Neighbourhood Rebuild Programme, which will upgrade and repurpose underused buildings and construct new facilities through a combination of public investment and public-private partnerships.
For NHS staff, these centres represent a shift towards more integrated, community-based care delivery, potentially creating new working patterns and opportunities for multidisciplinary collaboration.
Efficiency and Productivity Targets
The Budget maintains the requirement for the NHS to deliver 2% annual productivity improvements. This efficiency target was set at Spending Review 2025 and will unlock £17 billion of savings in England over three years, to be reinvested back into the health service.
NHS trusts have also been told to reduce their "corporate cost growth" by half the amount from before the pandemic. The Government states that the NHS can retain and reinvest the efficiency savings delivered in 2028/29, providing an incentive for meeting these targets.
Whilst productivity improvements can benefit staff by streamlining processes, they also represent additional pressure to do more with existing resources. Historical attempts to drive efficiency in the NHS have often resulted in staffing cuts, though the Government maintains that savings will be reinvested in frontline services.
Training and Workforce Expansion
The Budget reaffirms the Government's £2.4 billion commitment over five years for the NHS Long-Term Workforce Plan. This includes funding to train more GPs, though a specific funding figure for GP training is not provided in the Budget document. The Government has already recruited over 2,500 more GPs since coming into office in July 2024.
Additionally, the Budget commits to expanding mental health support teams to all schools in England by 2029/30 and employing 8,500 additional mental health staff by the end of the Parliament.
There is also allocation of funding for 700,000 additional urgent NHS dentist appointments per year over the Spending Review period.
Prescription Charges and Cost of Living Support
For NHS staff as citizens, the Budget includes several measures to reduce cost of living pressures:
- Prescription charges frozen: The single charge will remain at £9.90 for a year from April 2026
- Energy bills reduced: Around £150 on average will be removed from household energy bills from April 2026
- Rail fares frozen: Regulated rail fares in England frozen for one year from March 2026, saving commuters on expensive routes over £300 annually
- Fuel duty cut extended: The 5p fuel duty cut will continue until August 2026
The Warm Home Discount has also been expanded to reach six million households this winter, providing £150 off energy bills for eligible low-income households.
Pension Considerations
Whilst not specific to NHS staff, the Budget announces changes to pension tax relief that may affect higher earners. From 2029, the Government is capping the amount that can be contributed via salary sacrifice without paying National Insurance at £2,000 per employee. This cap protects 74% of basic rate taxpayers currently using salary sacrifice, but may affect senior NHS staff with higher pension contributions.
The Government continues to support pension saving through auto-enrolment and tax relief, worth over £70 billion per year. The Budget emphasises that tax relief on pension contributions remains in full.
Pay Structure Reform and Next Steps
The Budget confirms that the Government is working with the NHS Staff Council on a funded mandate for 2026/27 to begin resolving outstanding concerns within the Agenda for Change pay structure, including issues with pay banding and career progression.
The Government has committed to improving the pay award timeline, with an ambition to implement future pay awards as soon as possible in subsequent years. For 2026/27, the Government plans to remit the health Pay Review Bodies in July, aiming for earlier implementation than in recent years.
The NHS workforce remains under significant pressure, with the Budget balancing investment in services and staff with efficiency requirements and administrative restructuring. The Government's Plan for Change target of 92% of patients starting consultant-led treatment within 18 weeks of referral by the end of Parliament will require sustained effort from NHS staff, supported by the investments and reforms outlined in this Budget.
