News / Baumann highlights change in risk reserve structure

Clinical commissioning groups have again been asked to set aside 1% of their allocations for non-recurrent investment. However, half of this – £360m – is uncommitted to provide a contribution to a system risk reserve to support the wider health system if required. The other 0.5% can be spent non-recurrently to support transformation and change under sustainability and transformation plans. 

The £830m reserve, according to this year’s planning guidance, is made up of £360m from CCGs; up to £200m from NHS England, funded from drawdown; and £270m from the provider sector. To create the latter contribution, the guidance said 0.5% of the local CCG CQUIN scheme would be held back. If a provider delivered its 2016/17 control total, the funds would be paid to the provider, but it is required to hold it as a reserve until authorised to release. 

The CCG holds the reserve if a provider
 did not accept or failed to deliver its control total. However, in both cases, the funding will only be released for investment by the provider when it is demonstrated that the local health system is delivering its control total.

Speaking at the NHS England board meeting in July, Mr Baumann highlighted the contribution commissioners made to overall financial balance in England in 2016/17, when their 1% risk reserve (£800m) was fully used to help offset provider deficits.

‘This year the system reserve is constructed slightly differently, with commissioners and providers each contributing to the reserve – £560m from CCGs and NHS England, and £270m from providers in the form of a reserve within their CQUIN earnings.

‘Given the deficits in provider plans and the significant in-year delivery risks in both commissioner and provider sectors, clearly it is going to be essential that the professional discipline of commissioners last year in holding and releasing the system risk reserve is maintained by both sectors this year.’

The commissioning sector as a whole reported a small underspend at month two, but it is forecasting it will end the year broadly in line with plan (£4.9m overspend, excluding the release of the 0.5% CCG risk reserve). 

Mr Baumann said the figures do not include the impact of the capped expenditure programme (CEP), where 13 local health economies have made additional adjustments to their spending plans to ensure they keep within their spending envelopes. 

‘Successful execution of the measures under the CEP is absolutely essential if we are going to live within our means in the most challenging year for a long while.’

In the current year, commissioners planned to deliver efficiency savings of £3.4bn, almost £1bn more than 2016/17 – which was in itself a record year for efficiencies, Mr Baumann said. But he added: ‘Most of the increase is due to come from transformational schemes, so the easy stuff is largely done; the difficult stuff lies ahead of us.’