NAO report reveals dire financial position of NHS, says Nuffield Trust

By Agencies
January 20, 2018

Additional funding, aimed to help the NHS get on a financially sustainable footing, has instead been spent on coping with existing pressures, according to the National Audit Office’s (NAO) report, published on 19 January 2018.

The NHS received an additional £1.8 billion Sustainability and Transformation Fund in 2016-17 to give it breathing space to set itself up to survive on significantly less funding growth from 2017-18 onwards. It was also intended to give it stability to improve performance and transform services, to achieve a sustainable health system.

The Fund has helped the NHS improve its financial position from a £1,848 million deficit in 2015-16 to a £111 million surplus in 2016-17. Within the overall position, the combined trust deficit reduced to £791 million in 2016-17 from £2,447 million in 2015-16. There has also been an improved underspend of £154 million across clinical commissioning groups, yet 62 groups reported a cumulative deficit in 2016-17, up from 32 in 2015-16.

Despite its overall financial position improving, the NHS is struggling to manage increased activity and demand within its budget and has not met NHS access targets. Furthermore, measures it took to rebalance its finances have restricted money available for longer-term transformation, which is essential for the NHS to meet demand, drive efficiencies and improve the service. For example, the Department transferred £1.2 billion of its £5.8 billion budget for capital projects to fund the day-to-day activities of NHS bodies.

On top of this funding, many trusts are receiving large levels of in-year cash injections, most of which are loans from the Department, which have worsened rather than improved their financial performance. Extra cash support increased from £2.4 billion in 2015-16 to £3.1 billion in 2016-17.

Clinical commissioning groups and trusts are increasingly reliant on one-off measures to deliver savings, rather than recurrent savings that are realised each year. Between 2014-15 and 2016-17 the percentage of savings that were non-recurrent increased from 14 per cent to 17 per cent for commissioners, and from 14 per cent to 22 per cent for trusts. This poses a significant risk to the financial sustainability of the NHS in the future.

Progress has been made in setting up 44 new partnership arrangements across health and local government, which are laying the foundations for a more strategic approach to meeting the demand for health services within the resources available. In reality, partnerships’ effectiveness varies and their tight financial positions make it difficult for them to shift focus from short-term day-to-day pressures to delivering transformation of services.

The NAO has made a number of recommendations to the Department, NHS England and NHS Improvement, which includes moving further and faster towards aligning nationwide incentives, regulation and processes, as well as reassessing how best to allocate the sustainability and transformation funding.

Amyas Morse, head of the National Audit Office, said, "The NHS has received extra funding, but this has mostly been used to cope with current pressures and has not provided the stable platform intended from which to transform services. Repeated short-term funding-boosts could turn into the new normal, when the public purse may be better served by a long-term funding settlement that provides a stable platform for sustained improvements".

Commenting on the NAO’s report, Nuffield Trust Senior Policy Analyst Sally Gainsbury said, “As this report makes clear, the NHS is in a dire financial position. For several years hospital trusts have been grappling with the twin pressures of rising prices and significant cuts to the amount of money they receive per patient. This has meant they are relying increasingly on one-off savings and bailouts to balance the books, leading to a significant underlying deficit – something we have consistently highlighted. 

“This has left hospital trusts with no choice but to spend the money earmarked for reforming services – the Sustainability and Transformation Fund – on dealing with their yawning deficit. But the NHS cannot go on like this. The NAO is absolutely right that we need greater clarity on how large the underlying deficit really is – and their recommendation that this be published annually is very welcome.

“Longer term, this report adds further evidence – if it were needed – that the NHS is in desperate need of more money. Unless politicians can grasp the nettle and put it on a more sustainable footing, hospitals will sink deeper and deeper into the red, adding to the already very concerning situation facing patients and staff alike.”

Nuffield Trust calculations show that a hospital will be given just £937 in cash this year to treat a patient they would have received £1,000 in cash to care for in 2009/10, which is more like £760 when adjusted for inflation.

Read the National Audit Office report here

* National Audit Office https://www.nao.org.uk/

* The Nuffield Trust https://www.nuffieldtrust.org.uk/


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