Sally Gainsbury, senior policy analyst at the Nuffield Trust, said NHS England was headed for an unfunded overspend of £4.8bn this financial year due partly to the pay deal with doctors' unions in July.   

Gainsbury said: ‘At a time of extremely tight public finances, it would be tempting to hope that a large funding increase next Wednesday could deliver the reforms needed to improve the NHS for the future. But this is a service that is running to stand still.

‘If it is overspent to the tune of £4.8bn at the end of this financial year, this will likely mean further cuts to non-NHS budgets like public health and technology, achieving the very opposite of the laudable aims to prioritise improvements in these areas, announced for the government's 10-Year Plan.'

The Nuffield Trust briefing reveals that even by July, the day-to-day running costs of the NHS had already required the budget to be boosted by a further £7bn in transfers from the Department, in addition to the £165bn spending envelope set for it in the March Budget earlier this year.

Gainsbury finds:

•           the NHS England budget published in March was set at a rate significantly below the speed of population growth and the level of patient need, meaning in-year top-ups have been needed to shore up day-to-day services 
• by the end of July, NHS trusts were spending 4.6% more in real terms each month than in 2023/24 to manage growing need
• taken together with the impact of pay settlements and the cost of pensions uplifts, these cost pressures mean day-to-day spending by NHS England will this year be £12.9bn higher than in 2023/24, of which £4.8bn is not currently covered by NHS England or DHSC budgets
•           fully funding that without further cuts to DHSC's unprotected budgets would require a real-terms headline increase to DHSC's 2023/24 revenue budget as set out in the March red book of 3.6% (including the additional cost of the Treasury's pension rate) to £186.4bn, with more needed if transfers already made are going to be compensated. 

Gainsbury argues a lack of transparency affecting NHS accounts is hampering adequate planning and understanding of health service budgets, and calls for an end to the misleading separation between NHS and non-NHS health and social care budgets when funding is announced.

This would better recognise that investment in public health, health care infrastructure, social care and the NHS are all interdependent, she says.

Matthew Taylor, chief executive of the NHS Confederation, said the analysis was further evidence of the 'intractable financial challenges facing the NHS'.

He added: 'NHS leaders understand the very difficult fiscal position the government is in and would welcome the 4% increase that is reportedly being considered for the Budget. But that 4% will need to go a long way as it needs to cover new pay deals, meet growing demand, recover performance against key targets and transform the way local services are delivered. That won't be a given when NHS organisations are already having to meet record high efficiency targets.

'Our members report that a big injection of capital funding is required to make sure their staff can be as productive as possible. New investment in the NHS should not be regarded as a drain on public resources but as crucial to driving economic activity and getting more economically inactive people back into work.'