Elective recovery fund capped for rest of year

NHS England chief finance officer Julian Kelly said the Treasury had now provided a “fixed pot” of funding for elective activity in the three months to April, according to sources on a briefing call yesterday.

It marks a departure from the previous three quarters of 2024-25, in which the Treasury had agreed to fund as much planned care as trusts could carry out.

NHSE will now cap each trusts’ ERF funding based on their own estimates, as of November, of how much activity they would carry out for the remainder of the year.

It draws an end to months of uncertainty about how much local providers would be able to secure from the elective recovery fund.

HSJ revealed in October that ministers and NHSE were negotiating over whether to cap the ERF. Several CEOs said at that point Mr Kelly had assured them additional activity would be funded. Many trusts and systems are thought to be relying on additional ERF income to balance their financial plans. 

Full details of how the ERF will operate in 2025-26 have not yet been disclosed, but it is expected to be capped, and at a national level, to cover about 118 per cent of 2019-20 activity, on a cost-weighted basis. That is a similar level to that carried out in recent months. 

Speaking on a webinar yesterday, Mr Kelly also said that NHSE would be removing “most of the ringfences” on the “service development fund” – funds which are, under plans, meant to be earmarked for national priority areas.

Mental health, some technology funding, elements of primary care and some Pharmacy First will be protected, he said. Other SDF schemes that do not appear to be protected include autism, learning disabilities and prevention.

Mr Kelly told finance directors that each trust’s cap for the remainder of 2024-25 would be based on full-year forecasts submitted in December. These included a “significant increase” on projections made in previous months, he said.

The finance chief said the allocations had to be spent on extra activity, could not be used to reduce deficits, and, if they were underspent, should be redirected to other areas which can carry out more elective work.

Last year the government launched a value-for-money review into the ERF, after concerns that the Treasury had paid out large sums without a corresponding decline in the size of the waiting list.