News / Commissioners’ risk reserve to offset provider deficits

The commissioning sector is on
track to record a small year-end underspend and create an £800m risk reserve – but the funds will be used to offset provider deficits rather than being released for investment, NHS England chief financial officer Paul Baumann (right) said.

The provider sector forecast an overall deficit of £873m at quarter three. Although NHS Improvement believes the position could improve by year-end, the reserve set aside by commissioners at the start of the year to cover risks across the commissioning and provider sectors will be needed to balance the overall NHS position.

Mr Baumann said 2016/17 was a difficult year for CCGs in particular and they faced an uphill struggle to make ends meet, while creating the lion’s share of the £800m reserve. 

This was reflected in the increase in the level of savings required from an average of
2.2% in 2015/16 to 3% in the current financial year. At Q3, NHS England is reporting a small £61m overspend across all budgets. But the sector is forecasting, before the release of the reserve, an effective break-even position at the year-end. 

The risks to the delivery of that position had declined from more than £500m at quarter one to £148m at Q3. 

‘We have some way to go if we are going to identify sufficient mitigations to be confident about meeting our objectives, but we are heading in the right direction,’ Mr Baumann said.

Most of the remaining CCG financial risks were likely to materialise, so the success of delivering the financial objectives depends largely on its ability to find additional
mitigations elsewhere.

‘Either way, we will deliver a substantial contribution to financial balance across the health sector when the £800m is brought into play,’ continued Mr Baumann. 

‘In that context, I have to say that it does look very likely, if not certain, that the £800m reserve, regrettably, will need to be released to commissioners’ bottom lines to secure overall financial balance rather than being available for investment.’

NHS England chief executive Simon Stevens added: ‘That £800m is dependent on CCGs not using any of the 1% or not increasing their overspend in support of their local providers. 

‘That money would come off the £800m, which is needed for the provider sector nationally, so it would not be a sensible thing to do. That is something we need to make sure is understood right through the system.’ 

Despite increasing the delivery of efficiencies by £538m compared with last year, at month nine, clinical commissioning groups reported a year-to-date overspend of £437m, with a forecast year-end £370m overspend.

However, this was balanced by the financial position of other commissioners. Specialised commissioning is expected to balance its books by the end of the financial year. While there were small underspends in other areas of direct commissioning, the big area of action was in central budgets, where NHS England was continuing to identify savings to offset overspends in CCGs, Mr Baumann said.

In its Q3 report, the provider sector had a £886m deficit, which was £202m more than planned. The year-end forecast deficit of £873m is £293m more than the deficit planned, though NHS Improvement chief executive Jim Mackey said the Q3 position was £1.3bn better than at the same point in 2015/16.