Mid-year NHS deficit worse than forecast at £1.6bn

20 Nov 15

NHS providers recorded a deficit of £1.6bn in the first six months of the financial year, £358m worse than planned, due to significant challenges across the service, health watchdogs said today.

Figures published by Monitor and the NHS Trust Development Authority revealed that delayed transfers of care – where medically fit patients cannot leave hospital because the care they need from local authorities or others is not yet in place – were having an impact on finances. They were estimated to have cost NHS providers £270m over the first six months of this financial year.

Today’s update on NHS spending also highlighted that the provider sector spent £1.8bn on contract and agency staff, almost double what they planned.
Cost savings of £1.12bn have been made in the year, but providers were falling behind on their efficiency plans.

The figures, which follow a deficit of £930m in the first three months of 2015/16, “make for really challenging reading” said Jim Mackey, chief executive designate of NHS Improvement, which will bring together Monitor and NHS TDA from next April.

“NHS commissioners and local authorities need to work in partnership with local providers to help significantly improve how they tackle delayed transfers of care – a significant nation-wide problem which is directly impacting on the amount of beds available to clinicians so that they can treat their patients in a timely manner.”

He said Monitor and the NHS Trust Development Authority were intending to improve the financial situation by introducing a series of new hourly price caps to limit the amount of money various types of agency staff working in the NHS can earn.

Controls on management consultancy expenditure came into force in the summer and are expected to have an impact by the end of the year. NHS foundation trusts and NHS trusts will also be reducing capital expenditure for the remainder of the year where it is safe to do so.

Mackey said these measures would mean that providers have a better chance of improving their financial position through the remainder of 2015/16.
“However it is clear – especially as we see the majority of providers now struggling with their financial situation – that the national tariff for next year will need to be set at a level that will create the conditions where NHS trusts and foundation trusts can begin to plan to bring themselves back into financial balance, which will enable them to focus on what matters to patients: improving care,” he added.

Richard Murray, director of policy at the King's Fund, said the NHS was “in the grip of an unprecedented financial meltdown”.
He added: “Deficits on this scale cannot be attributed to mismanagement or inefficiency. Quite simply, it is no longer possible for the vast majority of NHS providers to maintain standards of care and balance their budgets.

“If the chancellor needed a wake-up call ahead of next week's Spending Review, this is it. The scale of the deficits provides yet more evidence that the additional funding promised by the government is needed sooner rather than later. If this is not forthcoming, the government should be honest with the public that the outcome will be an accelerating decline in standards of care.”

Health Foundation chief economist Anita Charlesworth said the data pointed to the deepening financial crisis with four out of five trusts are now in deficit.

“They underline the need for realistic hospital budgets, enough trained staff, investment in prevention to tackle rising demand, and sustained practical support for hospitals to unlock efficiency savings while maintaining quality of care for patients,” she added.

“Next week’s Spending Review needs to address the unprecedented scale of challenge facing the NHS. Additional investment needs to come sooner rather than later and there needs to be dedicated funding to support the changes necessary for a sustainable NHS.”

Paul Briddock, director of policy at the Healthcare Financial Management Association said the performance report continued to show the financially challenging environment in the Provider sector of the NHS.

“The financial situation of providers in the NHS is incredibly worrying,” he added. "The second quarter results continue the decline in the financial position of providers that we have seen since 2013/14. Alarmingly this makes the Q2 2015/16 position already £794m worse than provider deficit for the whole of 2014/15 and the overall forecast deficit for 2015/16 is now £2.2bn, £0.2bn worse than the original plan of £2bn.

“With 79% of all providers now in deficit it is patently obvious that it is a systemic problem facing provider finances which needs urgent attention. The NHS is simply not living within its means, which has consequences.”

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