The NHS will have to cut investment in cancer care if ministers award frontline staff a pay rise above 3% but refuse to provide extra money to cover it, health service bosses have warned. The NHS England chief executive, Amanda Pritchard, and Julian Kelly, its chief financial officer, made clear their belief that soaring inflation means the service’s 1.3 million staff deserve a pay award of more than the 3% the government has already given the organisation funding to cover. But they warned that any increase above that would force it to cut services, including primary care and the planned new nationwide network of centres intended to diagnose killer diseases early – unless the Treasury covers the cost of the higher amount. Every 1% above a 3% award will cost between £900m and £1bn to finance, Kelly told NHS England’s board meeting. The Guardian reported last month that the NHS Pay Review Body, which advises ministers on pay rises for all NHS workers except doctors and dentists, is due to recommend an uplift of at least 4%. Sources since then have confirmed that likelihood. NHS England has already had to absorb £1.5bn of unexpected extra costs this year because of high inflation, forcing it to make £800m cuts to its programmes, Kelly said. If ministers do award staff more, then the 3% originally planned “we would then be looking at having to … cut back on investment in our major areas, when our major areas are primary care, cancer care, or indeed at the margin … some big capital investments. In fact we were just talking about the diagnostic centres [intended to spot cancer and other illnesses sooner]. “[A] pay settlement higher than 3% and no extra money would entail some really difficult decisions.” It is “not realistic” to expect the NHS to absorb any extra costs, he added. Health unions are pushing for a pay rise of at least inflation, which is running at 9.1%, although nurses want 5% above inflation, while doctors are seeking “full pay restoration”, which would see them get a rise of 30% over the next five years. A combination of the extra costs of dealing with the latest resurgence of Covid, for example testing and agency personnel to cover NHS staff sickness, and inflation-driven higher costs, means the NHS is facing a cut of £2.5bn to its budget for 2022/23 – the biggest for many decades, Kelly said. “To put it in cash terms, it’s a £2.5bn real-terms cut that we have already worked out how we could live with, which is the first real-terms cut in NHS funding definitely since before 1997. I think it might even be since the mid-1950s,” Kelly said. At the meeting, Pritchard pointedly endorsed Kelly’s remarks. It was “an operational necessity” for NHS staff to be properly rewarded for their work tackling Covid and the care backlog. “If we are to retain the staff, we need to make further inroads into long waits, deal with all of the operational pressures … We have to be really clear that the right pay for our staff is a critical component.” The duo’s remarks potentially set up a tense encounter with the Department of Health and Social Care and the Treasury over who should foot the bill for any pay rise above 3%. The government is due to announce the salary increases for NHS staff, teachers and other public sector workers before the House of Commons rises for its summer recess on 21 July.