News / NHS England delivers balanced outturn despite major cost pressures

16 May 2024 Steve Brown

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The NHS in England ended 2023/24 with an underspend of £30m – just 0.01% under plan, according to draft accounts.

Julian Kelly HFMA conf 23

The effectively balanced position, reported in a financial performance update paper presented to the NHS England board meeting on Thursday, was delivered in the face of significant cost pressures and service disruption. 

At the same time, the board was told about ‘notable progress’ in some aspects of operational performance. These included meeting the 28-day faster diagnosis target for cancer for the second month in a row and delivering the highest number of urgent cancer appointments on record in March – a 33% increase in referrals compared with before the pandemic. There were also reductions in the number of patients waiting more than 65 weeks for treatment and in the time taken for ambulances to respond to category 3 calls.

NHS England chief financial officer Julian Kelly (pictured) said the ‘fraction of a decimal point’ underspend was down to how hard people had worked. ‘It is the second year in which we have spent less in real terms on a like-for-like basis, while we have continued to deliver [these improvements],’ he told the board. On capital, providers underspent their budget by just £4m compared with a total budget of £7.3bn – spending 99.9% of the capital resources available. ‘When the money is given, the NHS really does use it to good effect,’ he said.

The only significant underspend was on the ringfenced budget to cover the capitalisation of leases under the IFRS 16 accounting standard, where the budget was underspent by £107m. However, Mr Kelly said that forecasting in this area was extremely difficult. ‘The NHS overall has done a good job of living within the money on aggregate,’ he added.

However, the small underspend on day-to-day running costs at the overall NHS England level masked a £1.4bn overspend by integrated care systems – 1.1% more than their £133.6bn plan. This overspend was covered by underspends in other budgets, including: central costs (£445m); specialised commissioning (£94m); other direct commissioning (£183m); and transformation and reserves (£992m).

The system overspend was despite additional government funding of £1.7bn to cover the disruption to services and costs of covering industrial action. However, pay settlements for doctors and nurses averaged 5.5%, well above the amount that had been allowed for in system allocations. This increased funding and costs by £2.9bn. 

Inflation was also significantly higher than had been planned for when NHS England’s budget was set. Inflation averaged 6.5% when measured using the gross domestic product deflator compared with the government’s funding assumption of 3.2%. Mr Kelly’s paper to the NHS England board said that, in practice, non-pay inflation was higher than this for the basket of goods consumed, adding around £1.4bn to costs.