Spending watchdog warns Department of Health over "unsustainable" NHS finances

Government efficiency targets have only made the financial position of NHS bodies worse, warns the National Audit Office

By Josh May

22 Nov 2016

The NHS is heading for a fresh cash crisis after the public spending watchdog said that its "endemic" financial problems had led to deficits nearly trebling in the past year.

A report by the National Audit Office (NAO) highlighted figures showing that NHS trusts and foundation trusts were £2.45bn in the red in 2015/16, compared to £859m the year before.

Overall, NHS bodies ran a deficit of £1.85bn last year, up from £574m in 2014/15.  

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The NAO report also warned that the transfer of almost £1bn from planned capital spending to day-to-day budgets could undermine efforts to set the NHS on a secure financial basis in the longer term.

NAO boss Amyas Morse warned that the situation was "not sustainable" and said government efficiency targets had only succeeded in making the situation worse.

While acknowledging “considerable effort and funding” has been put in to try to stabilise the health service, the watchdog said the NHS and government had a “way to go” to prove that its plans had been successful.

“With more than two-thirds of trusts in deficit in 2015-16 and an increasing number of clinical commissioning groups unable to keep their spending within budget, we repeat our view that financial problems are endemic and this is not sustainable,” said Morse.

“It is fair to say aggressive efficiency targets have helped to swell the ranks of trusts in deficit over the last few years.” 

“It is fair to say aggressive efficiency targets have helped to swell the ranks of trusts in deficit over the last few years" – NAO boss Amyas Morse

To tackle the funding crisis, the government has put in place Sustainability and Transformation Plans (STPs) to compel trusts to bring forward proposals for efficiency savings in return for additional financial help this year.

Morse, however, said there was not yet evidence that the plans were going to be successful.

He said: “The Department, NHS England and NHS Improvement have put considerable effort and funding toward stabilising the system, but have a way to go to demonstrate that they have balanced resources and achieved stability as a result of this effort. Therefore, value for money from these collective actions has not yet been demonstrated.”

The most recent official statistics show trusts and foundation trusts ran deficits of £461m in the first three months of 2016/17 - though that figure was lowered by a £450m funding injection from the government.

The Department of Health said the Ggovernment had already brought forward plans to help tackle the crisis.

“We know finances are challenging for some parts of the NHS, which is why we have a strong plan to get back on track,” a spokesperson said.  

“We are already seeing progress, with 40 fewer trusts in deficit compared to this time last year."
“We are also investing an extra £4bn in the NHS this year to transform services and improve standards of care, which will rise to an extra £10bn per year by 2020/21.”

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