Labour's plan to abolish NHS England is reportedly in disarray, with ministers now considering setting up a new quango, dubbed "NHS England 2.0", to take on much of its existing staff instead of folding them fully into the Department of Health and Social Care. Officials have warned Health Secretary Yvette Cooper that the original merger plan is unworkable because NHS England employees enjoy significantly better pay and conditions than their civil service counterparts, meaning a straightforward absorption would require Treasury sign-off for numerous salaries exceeding normal civil service levels. This matters because it threatens to undermine one of Wes Streeting's flagship reforms, announced in March last year, to scrap what he called the "world's biggest quango" and bring its functions back under direct government control.

Pay disparities are stark: NHS managers can earn up to £45,000 more than equivalent civil servants, with senior NHS England managers on £112,782-£129,783 compared with £86,000-£117,800 for senior civil servants, and a similar gap at the band below. Of roughly 9,000 staff expected to lose their jobs under the merger, only 1,700 have left so far, all through voluntary redundancy, and sources believe the April 2026 deadline for completion will be impossible to meet. A government source denied a new quango was needed, while the King's Fund's Siva Anandaciva said reconciling pay scales, pensions and contracts across two "entirely separate organisations" was proving a major bureaucratic obstacle, with Cooper expected to decide how to proceed before relevant legislation reaches MPs next week.