Labour’s ambitious overhaul of the NHS has been thrown into disarray after health service leaders were forced to pause mass redundancy plans. The programme, which was meant to cut the size of integrated care boards (ICBs) in England by half, has stalled as unions warn of chaos and staff anxiety grows. At the heart of the crisis is a dispute over who will cover the £1bn redundancy bill—a cost many ICBs say they simply cannot afford.
Radical NHS Restructuring Stalls
As part of Wes Streeting’s reorganisation of the health service, NHS England ordered its 42 integrated care boards to slash their running costs by 50% by the end of 2025. This would involve reducing their combined workforce of around 25,000 staff to roughly 12,500, with job cuts due to begin this year.
The plan was presented as a way to “reset NHS finances” and ensure money is redirected away from administration and back into frontline care. Ministers have argued that for too long, too much funding has been tied up in management and bureaucracy. By cutting ICB staff numbers and consolidating them into 15 “clusters” and 11 new bodies, Labour hoped to create a leaner, more efficient system.
But the scheme has now descended into turmoil as ICBs warn they cannot cover the cost of redundancies within their budgets. Each organisation faces a bill of up to £42m to lay off staff—far beyond their financial capacity.
Redundancy Costs Spark Funding Dispute
The huge cost of making staff redundant has created a standoff between NHS England, the Department of Health and Social Care (DHSC), and the Treasury.
Jon Restell, chief executive of Managers in Partnership, which represents many ICB staff, described the situation as unsustainable:
“The redundancy bill will be eye-watering and well beyond the means of ICBs, even before their budgets are slashed by up to half. The government will have to pick up the tab.”
He warned that thousands of staff have been left distressed and desperate for answers, with local ICB leaders unable to give them clarity.
Unions including Unison have echoed these concerns. Helga Pile, Unison’s head of health, accused ministers of mishandling the restructuring:
“The standoff between the Treasury and NHS England over who’ll pay for redundancies just adds to workers’ sense of worry and anxiety. The handling of the situation has been a shambles. Meanwhile staff are left in limbo, not knowing if they’ll have jobs next year.”
ICBs Forced to Halt Job Cuts
Across the country, ICBs have been forced to pause or abandon their redundancy programmes while negotiations drag on.
- North East and North Cumbria ICB admitted it could not begin staff consultation because the projected cost of redundancies could not be met in 2025–26. Chief executive Sam Allen warned that moving forward without clarity on funding would put their financial plan at serious risk.
- ICBs in South Yorkshire, West Yorkshire, Humber and North Yorkshire, and South West London have also stopped their consultation processes.
- Other boards, including those covering Lincolnshire, Derbyshire, Nottinghamshire, Northamptonshire, and Leicestershire, now expect job cuts to continue into 2026–27—well beyond the original timeline.
In Nottingham and Nottinghamshire, Dr Kathy McLean, chair of the local ICB, warned that months of preparation work for the planned restructuring into smaller clusters had “come to a standstill.”
The pause has left up to 12,500 staff in limbo, with many reporting severe stress and uncertainty about their futures. Some have even had to take time off sick due to the pressure.
NHS England Under Fire
Tensions have been heightened by confusion over who initially promised to cover the costs. Several ICB leaders claim NHS England indicated early on that a central fund would be available to help with redundancies. But its chief executive, Jim Mackey, denied this when questioned by MPs on the Commons health and social care committee earlier this month.
“We never said there was a central pot of money,” Mackey insisted.
However, at the same hearing, NHS England’s financial reset director, Glen Burley, suggested some flexibility would be needed given the slow progress and confusion surrounding the cuts. He acknowledged that the 2025 deadline for halving ICB costs may have to be reviewed.
Treasury Reluctant to Step In
So far, the Treasury has resisted calls for an emergency bailout, even as NHS England negotiates with the Department of Health and Social Care over options. The Treasury argues that efficiency savings are necessary to free up money for patient care.
A DHSC spokesperson defended the reforms, saying:
“Over the past 15 years, too much funding has been diverted to the back office at the expense of the frontline. Whenever big changes are made, vested interests complain – but this government’s sole focus is improving care for patients.”
The department also stressed that efficiency savings had already allowed the government to fund an above-inflation NHS pay rise this year and would enable billions more to be invested in deprived communities in the coming years.
But health unions say these reassurances ring hollow for staff stuck in limbo, unsure whether they will have jobs in the near future.
Staff Anxiety Growing
The uncertainty has created widespread anxiety across the NHS workforce. Staff working in ICBs—many of whom have dedicated decades to the health service—say they feel abandoned and undervalued.
Without clarity, some are reluctant to move on or apply for other roles, fearing they might lose redundancy entitlements. Others feel pressured to stay despite burnout, adding to the strain on morale.
Managers in Partnership reports a surge in distress among members, with staff describing themselves as “desperate for answers.” The union has urged NHS England and ministers to provide clarity immediately, warning that staff well-being and patient care could suffer if the dispute drags on.
What Happens Next?
The situation now hangs on ongoing negotiations between NHS England, the DHSC, and the Treasury. Until a funding deal is reached, ICBs say they cannot move forward with job cuts, leaving the restructuring in limbo.
Meanwhile, health leaders are warning of a serious knock-on effect. Budgets for 2025–26 and beyond already assume that ICB workforces will be nearly halved. Without redundancies, the financial plans will unravel, potentially forcing ICBs into overspending or making cuts elsewhere.
Dr Kathy McLean has already cautioned ministers that the current standstill risks undermining the entire reform programme. If the restructuring cannot proceed, Labour’s vision of a streamlined, more efficient NHS could collapse before it even begins.
Conclusion
Labour’s radical NHS reorganisation—intended to cut bureaucracy and free up money for patient care—has instead triggered confusion, anger, and paralysis. The £1bn redundancy bill has become a sticking point between NHS England and the Treasury, with thousands of staff left anxious about their futures.
For now, job cuts are on hold, but the clock is ticking. If the government cannot resolve the funding dispute soon, the restructuring risks derailing entirely—leaving the NHS stuck in limbo at a time when patients and staff need stability more than ever.