Commissioning underspend at £955m

05 June 2018 Seamus Ward

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The underspend was generated despite clinical commissioning groups’ month 12 outturn – a £250.5m overspend after applying £440m of the risk reserve and £71m of unearned quality premium. Before this, the overspend was £761m.

The CCG position was offset by underspends in direct commissioning (£228m); NHS England central spending (£891m excluding depreciation); and other technical adjustments (£87m). The system risk reserve was initially £560m – including £360m from CCGs, by holding 0.5% of their allocations uncommitted, and £200m in central uncommitted risk reserve.

A paper on the year-end position tabled at the NHS England May board meeting said a further £80m of reserves ‘from other sources’ was added to give a total of £640m.

This produced a total underspend of £955.3m, which NHS England said will offset overspends in the NHS provider sector.

However, NHS England chief financial officer Paul Baumann warned: ‘For 2018/19, NHS England and CCGs will not be holding any national contingency to cover wider system risks, as £650m has been allocated to expand the provider sustainability fund from £1.8bn this year [2017/18] to £2.45bn next year [2018/19].’

A commissioner sustainability fund will also be introduced.

Overspends were recorded in 124 CCGs, with 65 overspending by more than 1% against plan. Factoring in the risk reserve, these figures fall to 75 and 57, respectively.

Mr Baumann defended CCGs’ record. Despite ending the year with an overspend, they delivered unprecedented efficiencies – equivalent to 3.1% of their allocations (almost £2.5bn).

Much of the overspend was due to high levels of concessionary generic drugs prices set by the Department of Health and Social Care. However, the sector was able to offset some of this with an £80m rebate on category M drugs – medicines that are generally available but may be temporarily in short stock. The Department can allow price concessions to ensure availability, but this increases the cost to the NHS.

Mr Baumann said direct commissioning underspending was due to management action over the last two years, particularly in the Cancer Drugs Fund. Underspending on some dental services largely contributed to the underspend in primary care, while action in-year was taken to hold back central funds to offset emerging financial pressures in CCGs. Central budget underspends were a mix of non-recurrent income, central programme and running costs reductions.

Overall commissioner financial position