Health spending will not be cut but NHS expected to ‘find efficiencies’

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Health spending will not be cut in the autumn statement, the Guardian understands, but cabinet ministers have been told there would be a programme of reform for underperforming trusts.

Jeremy Hunt, the chancellor and a former health secretary, has warned against complacency and said the government expects the NHS and Department of Health and Social Care to find new efficiencies.

In a cabinet discussion on the NHS, Rishi Sunak said the health service was facing a “challenging winter”, though he praised the progress of the recruitment of 30,000 new nurses and the rollout of community diagnostic centres. A No 10 source said he made no explicit commitment on spending in his comments to ministers.

Steve Barclay, the health secretary, told cabinet ministers people were seeing a significant variation in quality of service across the NHS, which he said would be a “particular area of focus”.

A No 10 spokesperson said: “The prime minister said this government will always support the NHS and that they would continue to be prioritised as difficult decisions are taken on spending. He said that in return it was right to look at further ways to improve the service the public receive, and he was confident that this could be achieved.”

Asked if the health budget will be protected, he added: “I’m not going to get into individual budgets. The prime minister said it would be and the chancellor has talked about it being prioritised while difficult decisions are taken, but beyond that I wouldn’t get into more specifics on budgets.”

Sunak has also rowed back on cutting civil servant numbers, saying the target of 91,000 job losses had been abolished, as first reported in the Guardian.

However, he warned in a letter to civil servants that every government department will be told “to look for the most effective ways to secure value and maximise efficiency within budgets” in the autumn statement in November, “so that we can use taxpayers’ money sustainably in the long term”.

Amid warnings that the UK is likely to face years of tax rises to fill the ?50bn fiscal hole, the Treasury is set to extend the four-year freeze on personal tax allowances and thresholds, which will pull people into new tax bands and raise about ?5bn a year if extended in the late 2020s.

One senior government source said such “fiscal drag” would probably be the “guiding principle” behind raising taxes across the board.

The chancellor is understood to be planning a fiscal statement that balances spending cuts and tax rises 50/50, including a potential expansion of the windfall tax on oil and gas companies. Under George Osborne, the Treasury worked from a formula of 80/20 cuts and tax measures.

Other tax-raising measures under consideration include a toughened-up windfall tax, either increasing the amount paid or extending the tax until 2028. Another option on the table is targeting some more politically palatable personal tax rises, such as cutting pension tax relief for higher rate payers.

Though Sunak has previously increased national insurance to pay for NHS and social care reforms, MPs voted to scrap the increase under Truss at a cost of ?12bn. Government sources said that reinstating the rise remains under consideration, alongside all other tax measures, but it is understood to be difficult to ask MPs to vote to reverse a policy for the second time.

Despite plans not to cut health spending, NHS England is already weighing up cuts it will have to make to fill an estimated ?7bn hole in its budget next year because of inflation..

Julian Kelly, the NHS’s finance chief, warned last month that it would “have to completely revisit investment in cancer, mental health, primary care [and] diagnostic capacity” unless the Treasury increased its budget.

In a private briefing for senior colleagues recently the usually unflappable Amanda Pritchard, NHS England’s chief executive, was very gloomy about the financial situation facing the service and told them that “the money is a fucking nightmare”.

The extra financial commitments the health service is facing are on top of ?12bn in “efficiency savings” it has already agreed to make between this year and 2024-25.