NAO warns on dire state of NHS finances

18 Jan 19

Growing waiting lists and budget deficits do not “paint a picture that is sustainable” for NHS finances, the National Audit Office has warned.

NHS trusts and NHS foundation trusts had a combined deficit of £991m in 2017-18, while capital budgets were “repeatedly raided” to the tune of £1bn to plug gaps in revenue budgets, a watchdog report released today highlighted.

The NAO raised concerns that the “underlying financial health in some trusts is getting worse” and they were taking out increasing amounts in loans to help meet staff costs and pay suppliers. The total value of loans grew from £2.8bn in 2016-17 to £3.2bn in 2017-18.

A deficit of £558m has been forecast for 2018-19 by the trust sector based on the first six months of the year, the report said.

This is while patient waiting times continue to slip and NHS performance against key access standards has steadily declined since 2012-13. In 2017-18, only 88% of accident and emergency patients were seen within four hours, against a target of 95%, the report said.

The report stated that local NHS bodies were concerned that without a long-term funding settlement for social care “it will be very difficult to return the health sector to financial balance, given the links between health and social care.”

The prime minister promised the NHS £20.5bn extra every year last year but was criticised for not boosting funding to social care.

Amyas Morse, head of the NAO, said: “The [NHS long-term] plan we have seen so far seems to be based on prudent assumptions, but we will really be able to assess whether the ambitions set forth are supported by funding when we can see the results of the Spending Review for the non-NHS England parts of the health service, and the funding of social care.”

The NAO said other “key areas” of health spending like public health, doctors’ and nurses’ training and capital investments for buildings could affect the deliverability of the plan.

Anita Charlesworth, director of research and economics at the Health Foundation, said: “At present there is no sign of an end to the sustained cuts to public health, capital spending and workforce training budgets, all of which directly impact on patient care and productivity. Unless the 2019 Spending Review provides funding increases at least equivalent to that received by NHS England, the NHS’s ability to deliver the commitments set out in the plan will be severely hindered.”

The NAO also warned that there is a risk that the NHS will be unable to use the extra £20.5bn “optimally” due to staff shortages. It said that the extra funding could be spent on more expensive agency staff or may remain unspent as health care may not have the staff to deliver additional activity.

Meg Hillier, chair of the Public Accounts Committee, said: “Staff shortages and rising demand for NHS services are risks that need to be addressed if this additional funding is really going to make sure the NHS is on a sustainable footing for the future.”

The NAO highlighted “complicated” funding flows in the NHS which do not support partnership working, integration and the better management of demand.

Sustainability and transformation fund payments, which are meant to support providers in deficit, encourage short-term gains over long-term sustainability, according to the report. It said, 54% of fund payments in 2017-18 served to increase trust surpluses and has “driven disparity between trusts”.

The Department for Health and Social Care has been approached for comment.

Earlier this week, health sector leaders expressed concern that a no-deal Brexit would be a “disaster”.

An NHS England spokesperson said: “We agree with the NAO that the NHS long term plan is a prudent and practical routemap for improving health and care.”

Other comments on the NAO report:

Richard Murray, chief executive of the King’s Fund, said: "Complex NHS finances are bedevilled by short-term fixes, fragile workarounds, and unrealistic expectations. It is striking that the NAO is unable to fully assess the financial health of the NHS because of these complexities.

“The NAO report is right to highlight that the NHS funding settlement does not cover key areas of health spending such as public health, social care and doctor and nurse training Those difficult decisions lie ahead.”

Julie Wood, chief executive of NHS Clinical Commissioners, said: “In 2019-20 commissioners will face the considerable challenge of delivering system financial balance whilst reconfiguring local structures and delivering new clinical priorities as set out in the long-term plan.

“This comes alongside a 20% reduction in running costs, which means that clinical commissioners will have to do more for less, and continue to make difficult decisions to ensure the best value for the patients and local populations they serve.”

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