Financial balance expected by 2021/22, PAC told

31 October 2018 Seamus Ward

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The Department’s permanent secretary Chris Wormald told the Commons Public Accounts Committee (PAC) the NHS must meet its clinical and access objectives, regardless of the financial position, though overall financial balance across the service was required.

The provider sector entered 2018/19 with an underlying deficit of £4.3bn. This ignores the provider sustainability fund, which is non-recurrent. Assuming the fund is deployed in full in the provider sector, the underlying deficit falls to £1.85bn. Providers were planning for a deficit this year, but actions by trusts and commissioners in the first six months of the financial year may eliminate this planned deficit. Commissioners agreed a balanced plan overall.

Sir Chris told the PAC inquiry into the Department’s 2017/18 accounts and NHS financial sustainability: ‘One of the reasons we wanted a five-year financial settlement was to create a longer-term flightpath where it was conceivable to put those [deficits] right. I would probably guess two to three years.’

The Department’s director general, finance, David Williams added that the Department would agree the time period with NHS Improvement and NHS England when it signed off the long-term plan. ‘One of the financial tests the government has set is that we should return to that more specific set of financial balances during the duration of the long-term plan. It absolutely won’t be year one,’ he said.

The Department and NHS Improvement were considering two short-term incentive schemes to encourage trusts to produce a balanced position. Trusts planning a surplus that commit in advance to an improved position against their existing control total would receive a ‘bonus’ from the provider sustainability fund, Mr Williams said. The national bodies were also considering allowing trusts to account for the profits of asset disposals as revenue, but it is not clear how the incentive schemes would work.

Mr Williams also confirmed that only one trust was being charged the higher 6% interest rate on new loans.

He added that a capital to revenue switch was planned at national level again this year. However, he expected that with the new money in the five-year settlement coming in from 2019/20, there would be no further switches.

In 2017/18, £1bn was moved from capital to revenue at national level and the Department planned to move £500m in this financial year.

The Department’s senior figures were also questioned extensively about the preparations for exiting the European Union in the event that no deal is agreed. Sir Chris said the Department had spent money stockpiling medical consumables such as syringes, surgical gloves and dressings.

Though commercial confidentiality prevented him from revealing the full amount spent, he confirmed that spending ‘in the low tens of millions’ had been authorised to create the stockpile and purchase warehousing space.

Guidance was issued to trusts in October, asking them to think through the Brexit consequences of the supplies they receive, Sir Chris added.