Finances off plan but reserve funding given to Department

NHS England and NHS Improvement have planned for a balanced position at year-end. 

Meanwhile, Treasury supplementary estimates – which detail in-year adjustments to departmental budgets – show the Department of Health and Social Care has received an additional £420m of reserve funding.

In the supplementary estimates document, the funding is described as ‘reserve funding to cover unforeseen in-year pressures’.

Asked about the extra funding and the in-year pressures, the Department said the £420m reserve funding represents a backdated increase to the non-NHS element of its budget.

Non-NHS funding is allocated for running the Department and other arm’s length bodies, not including the NHS. It added the funding was backdated to 2019/20 following negotiations to increase non-NHS funding in 2020/21.

The fact that the funding is for the Department’s central budget has led some commentators to speculate that it will be used to offset the aggregate deficit in providers and commissioners.

NHS England and NHS Improvement chief financial officer Julian Kelly told the bodies’ recent joint board meeting that commissioner and provider year-end forecasts were in line with expectations.

‘Our current forecast is that at the end of the year, in aggregate, we think the balance of commissioners and providers will be about £400m off plan – bear in mind that that’s 0.5% of the total spend.

‘The number of organisations forecasting to be off plan is roughly half of what it was at this point last year, which shows progress in delivering the financial trajectories that we agreed, even if there is still more work to do.

‘We are working hard with regional teams, systems, providers and commissioners to continue to try to improve that position. We are managing the risk that it poses to the whole NHS mandate, in part through having gone harder this year at our own administration costs and in part because of lower than forecast drugs spend. This is a reflection of the commercial work done in the last two years.’

Mr Kelly also spoke about the 2019/20 capital position. ‘Against the allocation the Department has made, we are forecasting to be within £100m or so of that allocation,’ he said. ‘We continue to work with NHS organisations to make sure funding provided is spent. We are also continuing to work on the process to speed up approvals between systems, ourselves, the Department and the rest of government.’

For 2020/21, operational planning guidance set out a scheme to write off clinical commissioning group historical overspends. Where the overspends are more than 4% of a CCG allocation, a proportion – typically 50% – will be written off. The CCG will then agree a repayment profile for the remaining amount.

NHS England and NHS Improvement are planning to bring forward a scheme to reduce trust historical deficits, probably with a debt for equity swap. According to Mr Kelly, the detail had yet to be finalised, but he added: ‘We are in ongoing conversations with the Department and the rest of government about the process of recapitalising and creating a financially sustainable platform for the whole of the NHS.’