Covid costs reach £3bn in April and May

by Seamus Ward

29 July 2020

The NHS in England incurred additional Covid-19 costs of £3bn in the first two months of the financial year, leading to an overall £2.6bn overspend.

The Treasury has agreed to cover the additional costs of the pandemic and the national NHS bodies said they are in discussions with the government on funding for the remainder of the financial year. Earlier this month, the government announced the NHS would receive an additional £3bn to prepare for the winter.Matthew Style

However, the NHS England and NHS Improvement figures do not reflect most of the extra costs of personal protective equipment (PPE) and NHS test and trace – these are now procured and funded directly by the Department of Health and Social Care.

The figures were published just before a Commons Public Accounts Committee (PAC) report called for greater transparency on the costs of the pandemic, particularly relating to the creation of additional capacity, including the use of the private sector.

A report to the NHS England and NHS Improvement board meeting yesterday showed the pressures providers and commissioners continue to face. It said the extra costs were driven by national-level contracts for hospice and independent sector capacity, top-up payments to providers made under the temporary finance regime and clinical commissioning group overspends that related predominantly to additional Covid spending.

Matthew Style (pictured), NHS England and NHS Improvement director of strategic finance, told the board that the £3bn additional Covid-related costs were, broadly speaking, split 50:50 between commissioners and providers. Breaking down the additional costs, he said: ‘In the provider sector that includes lost income, principally from private patients, commercial income, local authority income and research income. It includes additional pay and non-pay costs – drugs and clinical supplies are the largest elements in that.’

He added: ‘As it’s set out in the paper, we’re showing an overspend, but just to be clear with the board, arrangements are in place to ensure that those costs are met and funded by the Exchequer. The expenditure is in line with the arrangements we have made with the government to cover the costs of Covid over the course of this year.’

The commissioning sector recorded a £2.5bn overspend; £1.4bn due to Covid spending. CCGs showed a £561m overspend against plan in the year to date – £461m of their expenditure was Covid-related – while direct commissioners had a £144m overspend against plan.

The provider year-to-date deficit was a more modest £45.6m. In the report, the sector’s position is compared against national modelling used to establish the value of block contracts and prospective top-ups. The commissioner position is compared, pro rata, with the 2020/21 mandate.

While providers’ income was around £456m less than planned, they incurred £478m of additional pay costs and other Covid costs of £696m, partially offset by reductions in expenditure of around £500m. Their overall Covid-related spending totalled £1.6bn.

The PAC called on NHS England and NHS Improvement to be more transparent about the costs and value for money of measures taken to increase capacity. These included the opening of the Nightingale hospitals and the contracts with independent providers for 8,000 additional beds, which ended on 28 June.

Some of the £3bn winter funding announced in July is due to be spent on continuing these arrangements. The PAC said: ‘We are concerned by the scarcity of information on contracts and costs. When asked, NHS England and NHS Improvement were unable, or unwilling, to provide any estimate of the cost of private sector capacity or the Nightingale hospitals. We are fortunate that the Nightingale hospitals have not been required so far during the pandemic, but it will not be a good use of public money if we continue to let them remain empty while elsewhere the NHS requires additional capacity for normal services.’  

It called on the national bodies to give details on the independent sector contracts by 1 September at the latest. The MPs on the committee requested information on how private sector beds have been used and how they will be used over the coming months. This should include details of what the second phase of the contracts should provide; the total cost and pricing mechanisms; and how capacity will be allocated.

The PAC also slammed the government approach to social care, saying it was ‘slow, inconsistent and at times negligent’.