NHS 'heading for £600m overspend'

8 Apr 15

The NHS in England is projected to have overspent its budget by more than £600m in 2014/15, an analysis by the Health Foundation has found, despite the service receiving an extra £900m in funding.

In its Hospital finances and productivity: in a critical condition? report, the think-tank found the financial performance of NHS providers in England has deteriorated sharply, moving from a net surplus of £582m in 2012/13 to a net deficit of £789m at the end of the third quarter of 2014/15.

Overall, despite an expected underspend from commissioners of £197m, it forecast that the NHS will have overspent by £626m when final figures were released, with spending on staff the biggest driver of rising operating costs. Spending on temporary staff grew by £1bn in 2013/14 and is continuing to rise in the current figures, chief economist Anita Charlesworth stated.

‘We found that the biggest driver of rising operating costs is staff, which account for around two-thirds of NHS providers’ operating costs. The sharp rise in temporary staff (15.8%) resulted in spending growing by £1bn (27.8%) in 2013/14. In the third quarter of 2014/15 NHS providers data suggests that the pressure from spiralling temporary staff costs is continuing, with spending on agency staff rising by a further 30% for foundation trusts and 25% for NHS trusts.’

The deficit across the health service was despite an additional £250m from the Treasury and £650m from transferred from planned capital investment to revenue spending, she added.

‘It is abundantly clear that the NHS faces a substantial funding challenge over the next five years, and has a mountain to climb to match austerity with rising demand and expectations for the quality of care.’

The report also highlighted that the efficiency of NHS hospitals had only increased at an average rate of 0.4% over this parliament, substantially below the 2-3% that NHS England’s Five Year Forward View said would keep the additional funding needed in the next parliament to £8bn.

Charlesworth said a ‘herculean effort’ would be required to find greater efficiency savings and productivity improvements.

‘The bottom line is that the NHS will need additional funding of at least £8bn by 2020. It will also need to pump prime funding to support the major changes set out in the NHS Five Year Forward View.

‘But an incoming government needs to stabilise the finances of our hospitals and the NHS needs a clear strategy to realise more of the potential productivity gains which exist within the service.’

Responding to the figures, NHS Confederation chief executive Rob Webster said there was a need for political commitment both to £8bn of additional funding and to service changes needed to make £22bn in efficiency savings.

‘The report makes clear that investing in extra staff to boost quality and safety comes at a price,’ he said.

‘It underlines that the NHS requires a new focus on “allocative” efficiencies, by doing things in new ways that are better, simpler and more cost effective. It is vital that the public are involved in this conversation. 

‘If we are to succeed, the political parties must be straight with the public about the huge scale of the savings and increases in productivity required over the next parliament, even with extra investment. It means we will need to fundamentally change the way we provide care for millions of patients which itself will require funds for double running services and investment in estates, IT and innovation.’


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