The Conservatives and Liberal Democrats have agreed there will be a real terms spending increase in the NHS budget.

The coalition document published minutes ago by the two parties confirms that they “agree that funding for the NHS should increase in real terms in each year of the parliament, while recognising the impact this decision would have on other departments”.

Earlier today it was being reported that spending would be increased in cash terms but not real terms, but the document makes the real terms pledge an explicit commitment of the coalition government.

The Conservatives had made the pledge to protect NHS spending a central part of their election campaign. A poster featuring David Cameron saying “I’ll cut the deficit, not the NHS” was one of the first election posters.

The Liberal Democrats had not promised a “real terms” spending increase – and explicitly did not want to protect any government department from financial cuts.

Sources close to the Conservative Party told HSJ yesterday that a Conservative-Liberal Democrat alliance gave the Conservatives “political cover to cut the NHS” as it would be able to claim a U-turn on its earlier promise was the price of a stable agreement with the Lib Dems. However, the coalition document confirms the real terms increase has been retained as a pledge.

The parties have agreed that “deficit reduction and continuing to ensure economic recovery is the most urgent issue facing Britain”. Plans to tackle the deficit will be set out in an emergency budget within 50 days.

The agreement says there will be “arrangements that will protect those on low incomes from the effect of public sector pay constraint and other spending constraints”.

“The parties agree that modest cuts of £6bn to non-frontline services can be made within the financial year 2010-11, subject to advice from the Treasury and the Bank of England on their feasibility and advisability.”

Andrew Lansley has been appointed as health secretary. Every government department is expected to have at least one Liberal Democrat minister.

The agreement

The parties agree that a full Spending Review should be held, reporting this Autumn, following a fully consultative process involving all tiers of government and the private sector.

The parties agree that funding for the NHS should increase in real terms in each year of the Parliament, while recognising the impact this decision would have on other departments.