NAO highlights risks to long-term plan

In its annual report on the financial sustainability of the NHS, the audit body said that substantial deficits in some parts of the system, offset by surpluses elsewhere, coupled with growing waiting lists and year-on-year increases in waiting times did ‘not paint a picture that is sustainable’.

It praised the long-term plan – published earlier this month – for providing a ‘helpful indicator of the direction of travel’ and for providing a prudent approach to achieving the priorities set in return for the government’s long term funding settlement. However, it said the settlement did not cover key areas of spending. The 3.4% average real-terms uplift only applies to NHS England spending, with funding for capital investment, prevention initiatives and clinical training to be considered as part of this year’s spending review. Decisions on the long-term funding for social care will also impact on NHS sustainability.

Head of the NAO, Amyas Morse (pictured), said the promise of longer-term sustained funding growth for the NHS was a welcome development. ‘This should enable a more strategic approach to spending and we can expect to see a less turbulent financial context than in the last few years, if the funding is spent wisely,’ he said.

‘The plan we have seen so far seems to be based on prudent assumptions, but we will really be able to assess whether the ambitions set forth are supported by funding when we can see the results of the spending review for the non-NHS England parts of the health service, and the funding for social care.’

The NAO report – NHS financial sustainability – highlighted a risk that the NHS would be unable to use the extra funding optimally because of staff shortages. Difficulties in recruiting NHS staff could mean that expensive agency staff will have to be used to deliver additional services or funds could go unspent as providers are unable to deliver the additional activity sought by commissioners.

Reporting on financial performance in 2017/18, the auditors said the overall small deficit across commissioners and providers of £21m masked local disparities in financial health and patient experience. While NHS England had an underspend of £1,183m, clinical commissioning groups overspent by £213m and trusts reported a combined deficit of £991m (with providers having an underlying deficit of £1.85bn).

The NAO said that 69% of the total trust deficit (net) was accounted for by 10 trusts with the financial performance of the 10 worst-performing trusts deteriorating significantly in 2017/18. The number of CCGs reporting overspends against plan also increased from 57 in 2016/17 to 75 last year. The long-term plan is targeting all organisations being in balance by 2023/24, with the trust sector collectively in balance in 2020/21.

King’s Fund chief executive Richard Murray said the report underlined the depth of funding pressures and how difficult it will be to achieve the ambitions of the NHS long-term plan. ‘The NHS long-term plan aims to stabilise the health service, but its success rests on important decisions that are yet to be taken,’ he said. ‘The NAO report is right to highlight that the NHS funding settlement does not cover key areas of health spending such as public health, social care and doctor and nurse training. Those difficult decisions lie ahead.’

He added that NHS leaders want to focus on prevention and early diagnosis, but decisions on capital funding for diagnostic equipment would not be made until the spending review. ‘Meanwhile, latest figures show that waiting time targets for tests such as CT and MRI scans are continually being missed,’ Mr Murray said. 

Chris Hopson, chief executive of NHS Providers, described the report as an ‘accurate reflection of the current financial state of the NHS’. The average 3.4% yearly increase was not enough to meet every aspiration, he said, and the service would need to ‘ruthlessly prioritise’, while not underestimating the scale of the task to return the sector to surplus.

‘The NAO is right to say that workforce shortages remain a significant risk to the NHS and its ability to deliver on this investment effectively. The long-term plan cannot be delivered while there are still over 100,000 staff vacancies across the NHS,’ he said. ‘We need urgent action on this and it is a major concern that we will have to wait until later in the year for a comprehensive workforce plan.’

The NHS sustainability report also raised concerns that current funding flows remain too complicated and do not support partnership working, integration and the better management of demand. While some changes to centrally-managed support funds have been announced as part of the long-term plan, not all details of the financial reforms are yet known – including those relating to capital.

As part of six recommendations, the NAO called on NHS England and NHS Improvement to design and implement a simpler payment system, better aligned to the new structures, reducing transaction costs and promoting greater collaboration. In particular it called for a medium-term strategy for redesigning tariffs.