Escalating Clinical Negligence Costs Intensify Pressure for Reform

Rising clinical negligence expenditure continues to place significant and growing pressure on NHS finances, prompting renewed political and policy focus on how costs are calculated, managed and controlled.

Recent reports from the Public Accounts Committee (PAC), alongside the Treasury’s latest response to this, highlight the scale of current liabilities and confirm that a government action plan aimed at addressing these pressures is expected to be published later this year.

Government Liability Reaches £60 Billion

The PAC has confirmed that the government’s provision for clinical negligence has quadrupled over the past two decades, reaching approximately £60 billion in 2024/25. Annual settlement costs alone have risen to £3.6 billion, with projections suggesting this figure may exceed £4 billion per year by 2030 if current trends persist.

The Treasury, responding formally to the PAC, has accepted that these figures represent a significant challenge for the sustainability of the NHS. In its response, it acknowledged that no single reform will resolve the issue, describing clinical negligence costs as the result of “a series of complex issues which together bring an upward cost pressure on clinical negligence budgets.”

A timetable for reform measures, including key milestones and areas of focus, is now expected to be set out in writing to the PAC by autumn 2026, marking the next formal stage in the government’s approach to cost containment.

Legal Costs Continue to Outpace Damages

A central concern continues to be the disproportionate growth in legal costs, particularly in lower‑value claims. Claimant legal fees reached £538 million in 2024/25, having more than tripled since 2006/07.

In claims valued at £25,000 or less, claimant legal costs averaged 3.7 times the damages awarded, and such cases now account for approximately three‑quarters of all claims by volume. While high‑value cases remain the dominant driver of overall expenditure, low‑value claims contribute materially to total legal spend.

PAC Chair Sir Geoffrey Clifton Brown criticised the lack of meaningful progress in tackling these costs, describing the rising financial burden as “…a swelling accounting of profound suffering.” He warned that escalating legal expenditure directly reduces funds available for frontline NHS care.

The PAC has again urged the Department of Health and Social Care (DHSC) to explore mechanisms that would resolve lower‑value claims more quickly and proportionately, including fixed recoverable costs and alternative dispute resolution. The Treasury has confirmed that these options remain under consideration, with decisions to be informed by further analysis ahead of the autumn action plan.

At the same time, NHS Resolution has highlighted steps already being taken to control their own legal costs. It reports that approximately 83% of claims are now settled without litigation, while defence costs are managed through the use of fixed and capped rates for external legal advisers. These measures have helped limit expenditure on the defence side, and claimant costs remain the primary driver of legal spend growth.

Compensation Model Under Scrutiny

Another factor contributing to rising liabilities is the way future care damages are calculated. Awards are frequently based on private‑sector care costs, even where claimants may ultimately receive all or part of their care through the NHS. This has raised longstanding concerns about “double recovery”, where the public money potentially funds both compensation and subsequent NHS treatment.

Helen Vernon, Chief Executive of NHS Resolution, has previously emphasised that private care costs are a key driver of high value claims. She has noted that NHS Resolution has, in limited cases, negotiated reverse indemnities, allowing future NHS care provision to offset ongoing care payments. However, there are currently no routine mechanisms to monitor how compensation is used once awarded, significantly constraining the system’s ability to prevent double recovery.

The government has confirmed that this issue is being actively examined as part of its wider review of clinical negligence costs, although no specific proposals have yet been committed to. Any reform in this area may require legislative change.

Conclusion

Clinical negligence costs now represent one of the most significant long‑term financial pressures facing the NHS. With annual spending at historic highs and liabilities continuing to grow, attention has turned towards reform of costs, process and compensation structures.

The government’s commitment to publish a detailed action plan this autumn will be awaited by policymakers, healthcare providers and practitioners, as the NHS seeks to manage an expenditure trajectory that has become increasingly difficult to sustain.