Nuffield Trust: financial gap widening as trusts miss planned savings targets

11 August 2021 Seamus Ward

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Sally.Gainsbury lThe Nuffield Trust compared spending with the figures forecast when the five-year settlement was announced by Theresa May’s government in 2018.

At the time, the settlement added £20.5bn to NHS funding in England by the end of the five year period (2023/24), though it has since been superseded by funding increases and additional allocations for the NHS response to Covid.

The trust said providers faced the unfunded cost pressure because efficiency savings could not be delivered during the pandemic or planned efficiencies were unrealistically high. Even if efficiencies could be put back on track, the overspend would be £4.7bn in 2022/23 and £4.2bn in 2023/24, it added.

The trust said the pressures have been calculated once spending specific to the Covid pandemic have been taken out, and the £5bn gap represented ‘the cost of the NHS continuing to provide a broadly similar service as costs and patient needs rise’.

The Nuffield Trust based its analysis on a number of factors, including the national tariff efficiency rate of 1.1%, implied efficiencies needed to return the provider sector to financial balance by 2020/21, and additional spending required to meet NHS long-term plan commitments on mental health and community services.

Figures for the current year also take into account the 3% pay rise for most staff.

Nuffield Trust senior policy analyst Sally Gainsbury (pictured), who conducted the analysis, said the government faced difficult decisions in the forthcoming spending review – to give the NHS additional funding when the public finances were strained; to drop some of the long-term plan ambitions; or to ask for health service efficiencies at levels that seemed impossible to deliver in the past.

‘These extra costs beyond what the NHS anticipated will exist even once the onslaught of Covid-19 finally stops,’ she said. ‘It is crucial that they are recognised in the forthcoming spending review. The NHS cannot expect the full gap to be wiped out by extra money, but the Treasury needs to be realistic about where the health service is starting from.

‘Closing the gap by 2023/24, for example, would entail annual efficiency savings of around £4bn a year – more than twice the savings rate the year before the pandemic struck. Given providers have to find around £1bn in efficiencies just to stand still each year, it would be more realistic to assume that at best it will take five years to close this gap.’