Rachel Reeves declined the request Wes Streeting for an emergency injection of £1 billion into the NHS budget to cover the costs of mass redundancies.
The Chancellor's decision is a setback for the Health Secretary, who has been lobbying behind the scenes in Whitehall for more money to pay the 18,000 staff who have lost their jobs.
Instead, the Treasury Department allowed the Department Health and Social Care (DHSC) will overspend their allocated budget by around £1 billion this financial year. But this is on the understanding that in 2026-2027 he will have less money – and in general there will be no new money.
Streeting spent months trying to persuade the Treasury to provide additional funding to allow the NHS's 42 integrated care boards to begin reducing their role. They have been asked to cut about half of their 25,000 employees.
£1bn is needed to allow boards to finally reduce their workforce – a process that was due to be completed by the end of December. It also covers payments to an unknown number of staff in England's National Health Service, which is being abolished and merged with the DHSC in 2027.
Process stopped amid controversy over who should foot the bill for layoffs. The job cuts are part of a radical restructuring of the health system in England that Streeting ruled out when the Labor Party was in opposition.
NHS England bosses told ministers last month they needed another £3 billion this year to cover the cost of redundanciesstrikes by resident doctors – five days of strike we'll start this friday – and rising drug prices. They argue that all three events were unforeseen when setting the NHS budget for this year.
Sources said the Treasury has offered to strike a deal with the DHSC in which it would provide extra money for redundancies if the department agreed to cover the costs of rising drug prices.
However, no agreement has been reached and the additional drug costs are likely to be significant.
Streeting will confirm that the program to cut care commissions is finally getting underway when he speaks at the annual NHS Providers Conference in Manchester on Wednesday.
He will tell the hospital group that the abolition of “18,000 administrative positions” on care commissions is part of a process to “eliminate endless red tape and bureaucracy” that will save the NHS £1 billion a year by 2029.
DHSC confirmed that “funding arrangements have been agreed with HM Treasury and will be implemented within the framework of the existing funding agreement.”
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NHS services will be protected, he added, saying: “We will not cut any investment in the NHS, frontline or behind the scenes.”
Jim McKee, chief executive of NHS England, said: “This is good news for NHS staff and patients, allows our organizations to move forward and provides greater certainty for the future for all our staff and leaders.”
John Restell, of Managers in Partnership, the union which represents many NHS managers, said: “Today’s announcement of staff cuts ends months of government inaction which has caused avoidable suffering to our members as working people and left care board leaders in an intolerable position.
“The fate of important care board functions such as continuing care remains uncertain, and managers with digital and planning expertise will be made redundant, undermining the government’s own 10-year health plan.”
