Extra £1.5bn to cover inflationary pressures

19 May 2022 Seamus Ward

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Julian Kelly lSpeaking at today’s joint board meeting of the two organisations, chief financial officer Julian Kelly (pictured) said progress was being made in finalising system plans for 2022/23.

‘We are saying to the NHS that we want financially balanced plans that deliver the performance and activity goals set out in the planning guidance in December, consistent with the assumptions we set out in December.

‘Clearly one of the things that has really moved since then is inflation, which is running at much higher levels than anticipated in the spending round last November. We’ve said to the NHS we need to deal with that nationally but, setting that aside, we need balanced plans.’

The national organisations had worked with providers and commissioners to uncover the inflationary pressures on the service plus their financial impact (see table below). The total of these excess costs is £1.5bn. This includes additional care costs related to increases in local authority-funded prices, as well private finance initiative contracts tied to inflation (retail price index or RPI), additional fuel costs and the financial impact on ambulance services of the Flowers settlement on overtime and holiday pay.

A board paper added that in return for the additional funding, systems must agree to a number of conditions, including regaining control of agency and bank spending, and consultancy costs. It added that elements of transformation and capital funding would be dependent on finalising balanced financial plans.

Covid-19 levels have changed since the spending review, and was impacting on the level of activity agreed in the spending round, he said. ‘We’re looking at how that plays through as we seek to finalise plans. We are aiming to do this before the end of June so that we can finish the first quarter, establish integrated care boards, and get them on a firm foundation.’

Capital plans were largely balanced, he added. The Treasury had given approval for the programme business cases for electronic patient record, diagnostic and elective capacity investment. NHS England and NHS Improvement aim to finalise individual cases with systems shortly. Mr Kelly warned that there would be ongoing challenges on the maintenance and quality of the NHS estate.

 

Inflation costs in excess of December planning assumptions

 

£m

Energy

485

Care market

350

Private finance initiative contracts

110

Other RPI-linked contracts

125

Other

280

Ambulance service

150

Total

1500