Integrated care boards face further pressure to cut running costs

Integrated care boards are facing continued pressure to reduce administrative and commissioning costs as the NHS enters a new financial planning period, with national guidance setting tighter limits on spending and requiring systems to identify further efficiencies.

The pressure follows the major restructuring of ICBs, which required boards to reduce their running and programme costs by around 50% and move towards a smaller strategic commissioning role.

NHS England said in its Model ICB Blueprint that ICBs needed to reach an average running cost of £18.76 per head of population, representing an approximately 50% reduction in administrative costs. Boards were required to submit plans for achieving the reduction during 2025/26, with the changes intended to become recurrent in 2026/27.

The scale of the reduction varied between individual ICBs. NHS Confederation research found that the required reduction in running and programme costs ranged from 27% to 63%, depending on each organisation's starting position.

Its survey of ICB leaders also found that 95% of respondents were very or fairly concerned that the cost reductions could impede their ability to deliver national and system priorities. Leaders cited uncertainty over restructuring, redundancy funding and the loss of organisational capacity as particular concerns.

The financial pressure has now moved into a new phase.

NHS England's medium-term financial guidance for 2026/27 to 2028/29 sets an ICB cost of commissioning limit of £19.40 per head for 2026/27, rising to £19.80 in 2027/28 and £20.21 in 2028/29. The limit covers both ICB administration and specified programme expenditure.

The guidance also says NHS organisations must maintain a consistent focus on improving productivity, cutting waste and achieving value from every pound spent throughout the multi-year planning period. A 2% general efficiency requirement is also being maintained for 2026/27.

Separate running cost allowances continue to place a ceiling on ICB administration spending. NHS England describes the running cost allowance as the maximum amount an ICB can spend on administration, with any underspend available to be redirected into programme revenue expenditure.

The restructuring is also changing the number and size of ICBs. NHS England's strategic commissioning framework says the operating model is being reshaped around strategic commissioning, with the number of ICBs expected to fall from 42 to around 26.

The intention is for larger organisations and shared functions to reduce duplication while concentrating ICBs on population health, commissioning, resource allocation and oversight of services.

Some of the consolidation has already taken place. The Local Government Association reported that 12 existing ICBs were abolished from April 2026 and six larger ICBs established, with a further round of mergers expected in 2027.

However, NHS leaders have warned that achieving savings while maintaining commissioning capability will be difficult.

The NHS Confederation's latest assessment of integrated care systems found that more than half of ICS leaders considered NHS reorganisation the biggest barrier to their system's progress over the following two years. Leaders raised concerns about the effect of restructuring on staff morale, senior leadership capacity and organisational memory.

There are also concerns about the practical consequences of reducing commissioning capacity at the same time as ICBs are being given a more strategic role.

NHS England's own transition guidance recognised that some functions would need to be retained, including core finance and contracting capability, while ICBs would need to build expertise in analytics, strategy, market management and commissioning. It also said changes should be implemented safely and that savings should not simply be transferred to NHS providers without an overall reduction in system costs.

The financial squeeze comes as ICBs are also expected to deliver wider NHS transformation, including the shift towards neighbourhood health services, prevention and greater care outside hospitals.

That creates a difficult balance for system leaders. Reducing administrative duplication may release resources for frontline services, but reducing the capacity needed to analyse population needs, manage contracts and redesign services could make longer-term transformation harder to deliver.

The government's position is that reducing ICB bureaucracy is necessary to direct a greater proportion of NHS funding towards patient care. In March 2025, the Department of Health and Social Care said the reduction in ICB running costs was intended to streamline commissioning and administrative costs and prioritise frontline services.

The latest financial framework suggests that efficiency will remain a central requirement beyond the initial restructuring exercise.

For ICBs, the challenge is therefore shifting from simply implementing organisational reductions to demonstrating that smaller commissioning organisations can continue to provide effective strategic oversight while delivering the productivity gains expected across the NHS.

With further restructuring still planned, the coming financial years are likely to test whether the new model can deliver the promised savings without weakening the commissioning expertise and system leadership needed to deliver the wider NHS reform programme.