The new normal?

by Robert White

23 January 2018

Despite an overall improvement in the NHS financial position in 2016/17, the National Audit Office’s latest report finds that the NHS is still not seeing the level of financial stability expected and needed

In the middle of January, the comptroller and auditor general (C&AG) published his report Sustainability and transformation in the NHS. I’m sure you have your own experience and view of the financial position at present and the support mechanisms in place, particularly how well the latter worked in 2016/17. I start with this point not because it was the principal topic in our sixth annual report on financial sustainability in the NHS, but because it is the one making the headlines.

Nationally, the Department of Health and Social Care has kept expenditure within the envelope voted by Parliament, but the volatility in local financial positions is clear to see, and by ‘local’ I mean individual NHS statutory bodies. From our visits to sustainability and transformation partnerships (STPs), a common challenge included reconciling the responsibilities of individual providers, commissioners and local authorities with STP overarching partnership vision and goals.

In a number of areas, a lack of capacity and resources to make change in a timely manner was a significant barrier, feeling at times like an attempt to fix or modernise a car while the engine is running.

That said, let’s turn to the numbers, because off the back of a front-loaded spending review and the ‘financial re-set’, 2016/17 saw an improvement, including an absolute increase in the value of savings and efficiencies delivered by providers and commissioners, respectively £3.1bn and £2.0bn. As Matthew Style, NHS England director of financial strategy, said at the HFMA annual conference in December, those in NHS finance roles should rightly be proud of these achievements.

The re-set introduced the sustainability and transformation fund assisting the provider sector in moving from a £2.45bn deficit in 2015/16 to a deficit of £791m in 2016/17. Without it, 53 trusts would not have moved out of deficit and into a surplus. Add to this another 80 that finished with a surplus, leaving 102 with a deficit (156 the previous year).

When including clinical commissioning groups and NHS England’s activities, there was a move from reported deficits totalling £1,848m to a small surplus of £111m.

To the casual observer this might look like something of a success, but it is those other barometers of performance that contribute to the underlying picture. For instance, these include interest bearing support loans increasing, balance sheet strength weakening, rising percentages of savings being temporary or one-off, movements of money out of capital budgets and into revenue and a deterioration of patient waiting time targets.

Factors that contribute to this picture include a significant reduction in the average level of growth funding in recent years (3.7% trend versus 1.9%), cost savings and efficiencies that are not at a scale able to offset the reduction in funding and a demand for services that continues to rise. This description will be familiar to most readers.

Our conclusion? Despite all of the interventions and financial support, we are still not seeing the level of financial stability expected and needed within the NHS. To quote the C&AG, Sir Amyas Morse: ‘Extra funding 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.’

Our report does not intend to detract from the significant efforts made by staff across the NHS to manage resources, against a pressured and busy backdrop. Through our work, we aim to measure value for money and to make positive, effective recommendations. In that spirit of positivity we have made a number of suggestions to the Department, NHS England and NHS Improvement, which encourage:

  • moving further and faster towards aligning nationwide incentives, regulation and processes
  • reassessing how best to allocate the sustainability and transformation fund going forward
  • better understanding of the financial pressures in the trust sector to help inform the allocation of funding to clinical commissioning groups and trusts
  • aligning the resources of NHS England and NHS Improvement to better support local partnerships
  • local partnerships making the slowest progress to also be given sufficient support and opportunities to transform services.

I hope you feel we have captured the current landscape. Our work would not be possible without the support and insight that you have given us at a national, regional and local level and this in turn enables stronger Parliamentary scrutiny of the government’s delivery of our health service.