Health spending within budget by “wafer-thin” margin, says NAO

21 Jul 16

The Department of Health last year only narrowly avoided breaching the spending cap set by Parliament, earning it a reprimand from government auditors.

While the DH kept within the voted budgets set by Parliament for both revenue (RDEL) and capital (CDEL) spending by £210m and £58m respectively, a National Audit Office report issued today noted that the margins were “wafer thin” in the context of overall health spending in England.

And the DH only managed to stay within budget because of £417m in receipts from the National Insurance Fund. This was more than anticipated and something it failed to inform the Treasury of.

“Without these extra receipts, the department would have exceeded its voted RDEL,” the auditors said.

“This meant that the department exceeded its total budget by £207m, but remained within its voted RDEL budget by £210m.”

The DH has blamed the failure to notify the Treasury of the extra receipts as an “administrative error” and the Treasury has chosen not to impose fines on the department.

The NAO also noted that some of the actions taken by the DH to shore up NHS finances, such as raiding capital budgets to fill gaps in revenue, were short-term fixes and could have long-term consequences on investment and sustainability.

Reports on NHS England and the consolidated accounts of NHS foundation trusts were also published by the NAO today.

NHS England recorded a £599m underspend, the auditors noted, which contributed to the department’s position. “However, the major contributions to this have been either non-recurrent or have been adjusted for in budget setting for 2016-17, to maximise funding available for frontline services and primary care transformation in a year of exception challenge for the NHS,” the NAO said.

Despite extra resourcing – an extra £5.4bn has been allocated for 2016-17 – NHS providers can still expect a £500m deficit.

NAO head Amyas Morse said: “The NHS in England remains under significant financial pressure which is demonstrated in its accounts. It has again used a range of short-term measures to manage its budgetary position but this is not a sustainable answer to the financial problems which it faces.

“The department and its partners need to create and implement a robust, credible and comprehensive plan to move the NHS to a more sustainable financial footing.”

Richard Murray, policy director at the King’s Fund, said the NAO’s rebuke underlined the financial crisis that has been engulfing the NHS.

“The overspend has happened despite additional funding from the Treasury, extensive raiding of capital budgets and the widespread use of one-off accounting measures. Many of the short-term fixes used this year cannot be repeated and taking money out of capital budgets is reducing much-needed investment in buildings and equipment, storing up problems for the future.”

He added that future prospects were grim, with national leaders admitting today that the NHS will be in deficit again this year. 

“It is no longer credible to argue that the NHS can continue to meet demand for services, deliver current standards of care and stay within its budget,” said Murray.

“If the government is serious about restoring financial balance, it must review its priorities for the NHS and be honest with the public about what in can deliver with the money it has been allocated.”

  • Vivienne Russell

    Vivienne Russell is managing editor of Public Finance magazine and publicfinance.co.uk

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