New figures show that while the NHS in England finished the last financial year with a multi-million-pound underspend, 15 health systems ended 2025/26 in deficit.
NHS England board papers show that the NHS ended the year with a £70 million underspend at a national level, the first time in ten years it has delivered its financial plan without a reserve claim from the Treasury.
But the papers also said that the overall system deficit – including ICB net expenditure, provider income and expenditure – including deficit support funding (DSF) was £813 million, which reduces to £563 million once withheld DSF and delegated specialised commissioning are included.
They added: ‘The NHS ended the year with a £70 million underspend (0.035%) at a national level, as well as managing multiple rounds of industrial action, major restructuring programmes across all NHS organisations, and supporting the elective sprint in the final quarter.
‘For the first time in ten years the financial position has been delivered without drawing on a reserve claim from HM Treasury, demonstrating improved financial grip, building greater confidence from government partners, and a step change in how financial control and accountability are understood across the system.’
Some 15 health systems were reporting deficits when including DFS in 2025/26, compared to 17 the previous financial year, NHS England said.
The overall system deficit was driven by a £5 billion overspend in provider expenditure, although provider income was also £4.3 billion over plan, the papers show.
Meanwhile, ICB net expenditure was £176.8 billion in 2025/26, an underspend of £66 million against planned spending.
Speaking at the NHS England board meeting last week, director general for finance Elizabeth O’Mahony said she was ‘pleased’ to say that the NHS had delivered a £70 million underspend.
‘Lots of people, including some people out in the service, thought that this was undeliverable, but the camaraderie and the way that people have worked together has been exceptional,’ Ms O’Mahony added.
The board papers show that the five systems with the largest deficits including DSF were responsible for 88% of the total system deficit.
These were:
- Kent and Medway at £190 million;
- Cheshire and Merseyside at £178 million;
- Nottingham and Nottinghamshire a £170 million;
- Humber and North Yorkshire at £96.7 million; and
- Hampshire and Isle of Wight at £81.4 million.
Healthcare Leader approached the five ICBs but only received a response from Humber and North Yorkshire ICB, which said it would not be providing a comment.
NHS England’s board report said that system overspends were largely driven by slippage against efficiency plans, including workforce costs above planned levels, including the resident doctor strikes.
Systems delivered £10.2 billion (92%) efficiencies, a shortfall of £842 million to the planned level of £11.2 billion, but a £1.6 billion increase on 2024/25 levels, it added.
The report said: ‘We have seen significant improvements in 2025/26, with several systems that have historically faced huge financial challenges making substantial progress toward delivering their plans for the year and reducing the underlying deficits.
‘These improvements have largely been driven by full board ownership of the challenges, resulting in much stronger financial grip, better delivery of efficiency plans, and focused action on key cost pressures such as continuing healthcare expenditure and agency staffing.’
Danielle Jefferies, senior analyst at The King’s Fund, said it has been ‘really difficult’ for trusts and systems to manage their finances recently.
She added: ‘You’ve got things like covering the cost of industrial action, you’ve got rising costs of energy, inflation, you’ve got increasing national insurance contributions, you’ve got things like redundancy schemes going through.’
Ms Jefferies added that it was that progress on the financial position had not been made without ‘tough decisions’.
She said: ‘Yes, it’s positive that progress has been made, but it’s not been without a lot of hard work and a lot of struggles and a lot of tough decisions from leaders of NHS organisations who are having the divide between making their funding targets and cutting frontline staff, cutting services, reducing the amount of hours for different things, closing hospital beds, and meeting their financial targets.’
The government’s 10-Year Health Plan, published last summer, revealed that it planned to phase out DSF from the 2026/27 financial year.
Ms Jefferies said that as this funding is phased out, it might lead to trust and systems becoming more like local government, where they can go bankrupt.
While the funding was still being provided at the moment, she said ‘over the next few years we might see that actually that phases out, and it becomes more like local government, where local governments can go bankrupt, they can run out of money…because there isn’t that back up central funding from government.
‘So, we could start to see in the future if there are systems that don’t regularly balance their books, they do have to do more drastic funding measures, because they are phasing out that benefit support funding.’
