NHS Improvement reveals underlying deficit

The improvement body’s quarter one (Q1) report for 2018/19 provides a first official calculation of the underlying deficit carried forward into the current year, stripping out one-off and short-term savings and support funding. However, the £4.3bn figure ignores the £2.45bn Provider Sustainability Fund (PSF). The PSF is non-recurrent, but if it is assumed that these funds will be deployed in the provider sector in future, the underlying deficit falls to £1.85bn.

The report - Performance of the NHS provider sector for the quarter ended 30 June 2018 - highlights that the NHS has coped with a continuing increase in activity at the start of the financial year.  A&E attendances increased to 6.23 million over April, May and June – 220,574 more than the same period last year. There were also 1.14 million emergency admissions – 22,200 more per month via A&E than Q1 in 2017/18. Total non-elective activity admissions from all sources was also up 5.1% from the previous year.

Providers fell short of the A&E target, seeing 89% of patients within four hours compared with the 95% target. However, they saw more patients within four hours this year than in the same quarter in 2017/18. And at the end of June, 87% of patients had been waiting no longer than 18 weeks to start treatment, compared with the standard of 92%.

However, providers have helped to ease some of the pressures on beds by reducing delayed discharges and the number of long-stay patients.

‘Staff are working extremely hard to cope with a rise in A&E attendances and high occupancy levels,’ said NHS Improvement chief executive Ian Dalton (pictured). ‘A&Es up and down the country have been successful in treating more patients than ever before within four hours. We are helping trusts ensure that no-one stays in hospital longer than they need to, so that beds are free for other patients who urgently need them.’

NHS Improvement said that the operational pressures were continuing to have a material impact on NHS finances. At the end of Q1, NHS providers are projecting a £519m deficit for the full year, which is in line with the final plan as of the beginning of July. However, the oversight body said this was ‘clearly unaffordable’ – unlike previous years, there is no contingency being created by commissioners to offset provider overspends.

NHS Improvement and NHS England are continuing to work with the most challenged health economies to identify actions to ‘close the residual local planning gap’.

The year-to-date deficit after three months was £814m, £22m better than planned but £78m worse than Q1 last year.

Pay remains a key pressure. Last year, total pay costs were over £52bn, which was £1.5bn higher than plan and 3.3% up on 2016/17. For 2018/19, providers plan to spend £53bn – a 1.5% increase on the 2017/18 outturn – although this is before the latest Agenda for Change pay award, which the government has committed to fund in full.

After three months, providers had overspent on pay by £42m against plan – reflecting the continuing intense pressure in the acute sector. This is being driven by increases in temporary staffing with bank staff budgets £102m over plan and agency staff budgets overspent by £32m. In total this means total spending on bank and agency staff is up 11% on the same period last year.

Vacancies are also up by 9,000 to 108,000 compared to Q4 2017/18. This includes 41,000 nurse vacancies and 11,000 medical vacancies with 80% and 85% of these respectively filled by temporary staff.

Spending on agency staff was £32m above the new, lower agency ceiling target and is driven by volume increases and not agency rates. However, providers’ current forecasts suggest they expect to underspend against their agency ceilings by the year-end.

Responding to the report, NHS Providers chief executive Chris Hopson said trusts were doing everything they could to respond to the triple challenge of rapidly increasing demand, growing workforce shortages and continuing financial pressure. And he welcomed the transparency around the underlying deficit.

‘This will enable us to have the debate that we need on how the underlying deficit should be addressed as part of the forthcoming NHS long-term plan,’ he said. ‘The figures also show that our current approach is simply no longer sustainable. The long-term plan will also need to set out how we transform the NHS at pace to move to a more sustainable model of providing care.’

The King’s Fund chief analyst Siva Anandaciva agreed. ‘With hospitals and other NHS providers once again forecasting a significant end-of-year deficit, it is clear that the NHS finance regime is broken, with financial targets routinely missed and huge financial problems in some NHS organisations offset by surpluses in others,’ he said. ‘Today’s report is a reminder that the forthcoming NHS long-term plan must focus on reform and investment in new ways of delivering services, otherwise the NHS will be trapped in a perpetual winter crisis.’