News / Financial position worse than reported, says Nuffield Trust
The report argued that the STF should not be included in recurrent spending and, with its allocation dependent on the achievement of control totals, its distribution is uncertain and unreliable. It went on to say that surpluses made in 2016/17 – £715m – will not be spent (as revenue) in 2017/18 as trusts would risk breaching their income and expenditure target, putting access to STF money in jeopardy and potentially inviting regulatory action.
The improvement in trusts’ overall financial position was not the £1.7bn claimed by NHS Improvement, but £600m – the difference between the underlying deficit in 2015/16 (£4.3bn) and the £3.7bn underlying deficit at the end of 2016/17. However, the report added that trusts faced an overall cost pressure of £6bn at the beginning of 2016/17, so, by reducing the underlying deficit to £3.7bn, they had, in fact, improved their financial position by £2.3bn.
Trusts started the 2017/18 financial year with the £3.7bn underlying deficit and faced £2.2bn in unfunded inflation costs, the report said. To meet their target aggregate deficit of £500m, they will need the £1.8bn STF and to cut operating costs by 4.3% – £3.6bn in savings, Nuffield Trust senior policy analyst and briefing author Sally Gainsbury said.
This level of saving was unprecedented. A more plausible scenario would a repeat of the 2016/17 cost reduction level of 3.7%, including 3% from recurrent savings, she said. Under this scenario the underlying deficit would fall slightly to £3.5bn. There could be further difficulties in 2018/19 and beyond, with the rate of cost reductions slowing as the number of new savings opportunities fall.
Commissioners could also struggle to maintain financial balance, with their budgets being squeezed and activity continuing to rise.
Ms Gainsbury (pictured) said: ‘The official figures on NHS deficits don’t reflect how severe things are for hospitals in England, as the deficits reported include one-off funding boosts or savings that cannot be repeated the following year. Only by looking at the deficit after these have been stripped out can we see the scale of financial challenge facing the NHS – and it is eye watering.
‘NHS trusts have made billions of pounds of efficiency savings every year, but these have been largely absorbed by inflation, and reductions in the cash paid to them per patient.’
She added that increasing funding by a further £3bn by 2020/21 would address the deficit and transformation requirements and was affordable – NHS funding as a proportion of GDP in England would be maintained at the current 7.3%.
‘Increasing funding to wipe out these deficits and fund much-needed reform in the NHS is entirely possible and wouldn’t even increase the proportion of our country’s wealth spent on healthcare. Our hospitals are undoubtedly in financial crisis. But the solution to that crisis is not beyond the reach of the public purse.’
The Department of Health rejected the claims in the Nuffield Trust report. It said: ‘We accept the NHS faces significant financial challenges. To improve, savings must be made, supported by record levels of funding, but we reject any claim that accounts don’t reflect an accurate picture. Our accounts and those of each NHS body are independently audited by the National Audit Office.
It added: ‘It is unfair to claim trusts underreported NHS finances – it ignores the hard work of NHS leaders to make every pound go as far as possible for patients.’
Related content
We are excited to bring you a fun packed Eastern Branch Conference in 2025 over three days.
This event is for those that will benefit from an overview of costing in the NHS or those new to costing and will cover why we cost and the processes.