NAO warning on trust debt

The auditor issued two reports today – on financial management and sustainability, and capital spending. The former said NHS providers reported an £827m deficit in 2018/19, while clinical commissioning groups had a £150m overspend. NHS financial management and sustainability said trusts were becoming increasingly reliant on short-term fixes, including one-off savings to meet their annual financial targets. In 2018/19, 31% of savings were non-recurrent – it was 26% the previous year.

However, short-term measures had made some parts of the NHS less sustainable – more and more trusts are relying on short-term loans, effectively treating them as income. Most of this support (£3.3bn of the £3.6bn in 2018/19) was interim revenue support, rather than normal course of business loans. Providers have built up an unsustainable level of debt (£10.9bn in March 2019 – almost £3bn more than a year earlier) that they are ‘unlikely to ever repay’, the NAO said.

The second report, The review of capital expenditure in the NHS, said that over the last three years, trusts have requested an average of £1.1bn more than the capital spending limit. Backlog maintenance stood at £6.5bn and 14% of NHS buildings pre-date the formation of the health service in 1948.

Yet, in the last five years, governments have transferred £4.3bn from capital to revenue budgets. Though the Department of Health and Social Care was unable to clarify how this had affected patients, the NAO said the rising demand for capital funding and the growing maintenance backlog meant there was an increasing risk of harm to patients.

The auditor called on the Department, NHS England and NHS Improvement to revamp the funding system, ensure trusts are not reliant on short-term loans, and develop a clear, long-term capital funding strategy.

Gareth Davies (pictured), head of the NAO, said: ‘The short-term fixes that were introduced to manage the NHS’s finances are not sustainable. The Department of Health and Social Care continues to provide some trusts with short-term loans just to meet their day-to-day costs with little hope they will be repaid. This is not a sustainable way to run public bodies.

‘To bring about lasting stability, the Department and NHS England and NHS Improvement need to move away from short-term financial fixes and provide longer-term solutions.’

In light of the reports, Nuffield Trust senior policy analyst Sally Gainsbury questioned whether the new funding promised by the government would make a difference. ’The NAO’s report is a stark reminder of the very fragile financial state of the NHS. Government now needs to heed these warnings and put in place concrete plans to address staff shortages, invest in buildings and equipment and support social care and public health.’