Introduction

1. The NHS Oversight Framework details the overall principles, responsibilities and ways of working for oversight, including the key metrics and factors NHS England will consider when determining support needs, and the circumstances in which it considers formal regulatory intervention may be necessary to address particular issues. This will be superseded by the NHS Improvement and Assessment Framework in due course. The National Health Service Act 2006 (the 2006 Act), as amended by the Health and Care Act 2022, sets out the statutory financial duties of NHS England, integrated care boards (ICBs), NHS trusts and NHS foundation trusts. 

2. This document sets out the ICB and system finance business rules from 1 April 2023. In prior financial years, finance business rules have been released on an annual basis as part of the financial planning guidance. This approach is intended to give ICBs and systems greater certainty of the financial rules they will be required to operate within over the longer term, and the consequences of any breach.

3. For the purposes of this guidance, ‘systems’ are defined to be the ICB and the partner NHS trusts and NHS foundation trusts mapped to the ICB for the purposes of financial apportionment. NHS trusts and NHS foundation trusts are referred to collectively in this guidance as ‘trusts’.

4. Minor updates have been made to this guidance in January 2025 (and are highlighted in yellow) to reflect updates made to the ICB and system finance business rules in 2024/25.

5. This document should be read alongside the relevant NHS operational planning and contracting guidance.

Summary

6. The finance business rules are summarised in the table below, which should be read in conjunction with the detailed information that follows in this document.

Limits and objectives

7. As set out in section 223M of the 2006 Act (as inserted by section 29 of the Health and Care Act 2022), each ICB and its partner trusts must exercise their functions with a view to ensuring that, in respect of each financial year:

• local capital resource use does not exceed the limit set by NHS England
• local revenue resource use does not exceed the limit set by NHS England

8. As set out above, NHS England has set the objective that each ICB, and the partner trusts that have their resource use apportioned to it, should seek to deliver a financially balanced system, which may also be referred to as a ‘breakeven duty’.

9. In 2024/25, NHS England made updates to the ICB and system finance business rules arrangements to support systems facing financial challenges in seeking to achieve breakeven. These updates introduced revenue financial plan limits (the “plan limit”) for systems. Systems with a deficit plan limit were given non-recurrent support funding equal to the size of the plan limit. This support funding was issued on the condition that ICBs subsequently submitted a system financial plan that achieved breakeven, inclusive of the non-recurrent funding. Where NHS England has issued and communicated plan limits to ICBs (for 2024/25 or future financial periods), systems should seek to deliver a breakeven position, including any non-recurrent support funding, to be viewed as having met the requirements of the breakeven duty.

10. ICBs also have a duty to act with a view to ensuring that they deliver financial balance individually (section 223GC of the 2006 Act). This is to promote careful financial management and to reflect legislation that requires NHS England and ICBs to manage within a fixed budget. Where an ICB considers it necessary to deliver overall system financial balance, but with a deficit in the ICB itself, NHS England should be notified at the earliest opportunity. Additionally, each ICB should ensure it does not exceed its running cost allowance, which is published as part of ICB allocations.

Financial apportionment of trusts

11. Under the legislation, the system financial duties rest on each ICB and its partner trusts. As a trust may be a partner of more than one ICB, the legislation provides for NHS England to apportion a trust’s resource use for these purposes to one or more ICBs. As set out in the financial direction above, NHS England has apportioned the capital and revenue resources of all trusts exclusively to a single principal ICB, as set out in the NHS Organisation Data Service Directory*. The objectives of this approach are to ensure that the mutual responsibilities of the ICB and relevant trusts are clear (such as to meet system financial balance) and to provide stability and continuity in planning relationships.

*To refer to the full list of ICB financial apportionment relationships, access the ‘ICB financial apportionment’ tab within the file titled ‘ICB partner organisations’ on the ODS webpage using the hyperlink provided.

12. While the measure of system financial balance will be based on the mapping of a trust to a principal ‘host’ system, this does not change the requirement for all commissioners to work with the providers of their commissioned services to support financial sustainability and agree contractual terms that underpin this. Likewise, trusts that are formal partners of more than one ICB are required to confirm that their operational and financial plans are compatible with and align to all relevant system plans. In these cases, systems may agree local risk-sharing arrangements to reflect a trust’s service provision to multiple systems, while recognising that for the purposes of the statutory financial duties, their resource use counts only towards their host system’s duties.

13. In exceptional cases, trusts and the relevant ICBs may propose to NHS England that changes are made to the financial apportionment arrangements for future years. We would expect that such a change is based on a material change to the relationship between the trust and current host ICB: for example, the trust is no longer a partner of the ICB; a material service change has made the current apportionment relationship insignificant; or, in the case of ambulance providers, the lead commissioner has changed. Any changes in financial apportionment will only be implemented from the start of a financial year and should be formally agreed at least 2 months in advance of the start of the planning round for that year. We would expect that all such requests are discussed and mutually agreed by the relevant trust, ICB and NHS England regional director.

Risk management approach

14. Risk management remains a vital part of system planning. System plans, which must be agreed by ICBs and trusts, should show how financial risks will be managed. Where systems consider it appropriate to support risks to expenditure that may not otherwise be mitigated, the ICB should set aside an appropriate local contingency. While there is no nationally mandated contingency requirement, NHS England regional teams will continue to play an important role in supporting systems to assess the appropriateness of their risk management approach.

Prior years’ under and overspends

15. Given the requirement for systems and ICBs to seek to deliver a breakeven position each year, they should not plan for an in-year deficit. Any system or ICB that is overspending will be expected to take all necessary steps to correct its rate of expenditure to address the overspend.

16. If a system overspends for the year (and so does not achieve breakeven), the amount of the overspend will be carried forward and maintained in the cumulative system position. Cumulative system overspends will be subject to repayment, as set out below. This is a change from prior finance business rules in that over (and under) spends will be assessed on a system basis, rather than considering the ICB as a single organisation.

17. Where a system has an underspend (and so has a revenue surplus), the amount of the underspend will be carried forward and maintained in the cumulative system position. Any cumulative surplus from prior years may only be accessed through drawdown where agreed with NHS England.

18. In circumstances where systems have been set deficit plan limits (as described in paragraph 9), NHS England reserves the right to exclude income from non-recurrent support funding when calculating the cumulative system position (meaning the value of the support funding may therefore become subject to repayment). When communicating plan limits to ICBs for the relevant financial period, NHS England will therefore set out the consequences of plan limits and any support funding with respect to the cumulative position of systems, including where this is dependent on the final outturn position. This does not change how compliance with the system breakeven duty is viewed for systems receiving support funding, as described in paragraph 9.

ICB drawdown

19 .Access to any historical surplus for non-recurrent expenditure will be aligned to performance through the NHS Oversight Framework (due to be superseded by the NHS Improvement and Assessment Framework) and will be subject to national affordability. Any approved drawdown must be used for non-recurrent investment.

Treatment of historical CCG cumulative under and overspend

20. ICBs were established with a single brought-forward balance derived from any net historical clinical commissioning group (CCG) underspend plus any CCG under or overspend in 2021/22. Where the resulting brought-forward balance for the ICB
was a:

• net historical overspend – the balance was frozen and, where the system and ICB achieve breakeven for each of the following 2 years (2022/23 and 2023/24), will then be written off. Systems and ICBs that do not deliver this requirement will have this balance reinstated and it will therefore become repayable.
• net historical underspend – the balance was retained as a system surplus, held by the ICB, for future non-recurrent investment, as above.

Repayment of prior years’ overspends

21. All system overspends are subject to repayment. To allow a system time to stabilise its spending, repayments will not start until the second year following the year in which the overspends first arose. Repayments will be included when measuring any system overspend in the year when the repayment is made (the repayment will be treated as expenditure in that year).

22. The amount subject to repayment is the total cumulative system overspend (i.e. the net position of the ICB and of those trusts apportioned to it, plus any reinstated historical CCG overspend).

23. From 2024/25, repayments will be captured in planning templates through a new ‘repayment planning’ category and transacted through an in-year non-recurrent allocation reduction at the start of each financial year.

24. So that repayments are achieved over a sensible timescale and at a realistic pace, any overspends will be repaid over a 3-year period, subject to an annual cap set at 0.5% of the ICB allocation.

25. As long as the system meets the repayment obligations set out above, NHS England’s intention is that any residual balance would be frozen at the end of the third year of repayments and, as long as the system then achieves breakeven for each of the following 2 years, the frozen balance would be written off.

23. If the system fails to meet the requirements set out above to meet the repayments and achieve breakeven for each of the following 2 years, NHS England reserves the right to reinstate any frozen balances, in which case the cumulative deficit will become subject to repayment again.

Publication reference: PRN01628