Distributing funding more equitably

The 10YHP and the 2026/27 revenue and contracting guidance outlines that ICB allocations will move gradually towards their “fair share” allocations over time to ensure areas with the highest health need are resourced appropriately (NHS England, 2025). NHS leaders welcome this move and see it as a necessary corrective to restore fairness to the allocation of resources. 

NHS leaders from “underfunded” systems argue that recalibrating the allocations methodology is essential to addressing persistent health inequalities and building a financial framework that is at least equitable in its distribution of funding. However, NHS leaders from “overfunded” systems have expressed real concern about how quickly they may be expected to adjust to a new baseline. Many of these systems are already grappling with significant change, operational risks and underlying deficits, meaning a rapid and significant reduction in their allocations could create substantial instability and potentially hamper their ability to transform services. 

In combination with the withdrawal of deficit support funding, changes to payment mechanisms, and unbundling block contracts, major, rapid shifts in system allocations are likely to destabilise finances, halt progress that has already been made on financial recovery and delay delivery of the vision set out in the 10YHP. It is welcome news that NHS England has confirmed a gradual approach for moving systems back towards their target “fair share” of allocations – it will be important that this is monitored closely, and support made available to trusts and systems whose allocations will reduce in real terms over time.

NHS leaders view the aim of fairer funding distribution as both sensible and necessary. One of the key reflections from our conversations on distributing funding more equitably was that achieving a fairer distribution did not stop at fixing the methodology underpinning ICB allocations. Crucially, NHS leaders need to be empowered and supported to invest their resources into tackling health inequalities and improving the overall health of their local population. For example, work is underway across several ICBs to cross-examine population health need, with current levels of capacity and available resources across their system. 

As the government reviews the Carr-Hill formula (used to calculate funding to general practice), it will be important to consider how these allocations interact with ICB and trust allocations. At present, funding flows can reinforce siloed ways of working, making it difficult for resources to move flexibly between sectors in line with changing patterns of demand or revised priorities. If the ambition is to shift care into neighbourhood settings and support population health management, then financial flows must enable funding to follow patients and support more integrated models of care.
 
Recommendation: The 10YHP outlines that the Advisory Committee on Resource Allocation (ACRA) undertakes a review to target extra funding to areas with disproportionate economic and health challenges. As part of the review of the Carr-Hill formula, the government should consider stronger alignment between primary and secondary care funding models to ensure a coherent and consistent approach across the entire NHS to support the fair distribution of funding to areas identified to have the highest level of health need.