Freelance journalist
Share this content
health check
iStock_stockvisual_health check

NHS financial issues endemic, says NAO

25th Nov 2016
Freelance journalist
Share this content

The financial problems of the NHS are “endemic”, getting worse and are not sustainable, the National Audit Office (NAO) has said.

In 2015-16, NHS commissioners, NHS trusts and NHS foundation trusts in England reported a combined deficit of £1.85bn − more than three-fold increase in the reported position in 2014-15, the NAO report (‘Financial sustainability of the NHS’) said.

Health provider trusts' overall deficit grew by 185% to £2.45bn, up from £859m in 2014-15, against total income of £75.97bn.

Two-thirds of NHS trusts (65%) and NHS foundation trusts (66%) reported deficits in 2015-16, up from 44% of NHS trusts and 51% of NHS foundation trusts in the previous financial year.

The number of clinical commissioning groups reporting cumulative deficits was 32 in 2015-16, up from 19 in both 2014-15 and 2013-14.

Because trusts ended the year with an even larger deficit means that they will, overall, need to make more savings than planned to reach the intended starting position. Many of the savings made by NHS England in 2015-16 were one-off in nature.

“We repeat our view that financial problems are endemic and this is not sustainable,” said Amyas Morse, head of the NAO, which scrutinises public spending for Parliament.

“The Department [of Health], NHS England and NHS Improvement have put considerable effort and funding toward stabilising the system, but have a way to go to demonstrate that they have balanced resources and achieved stability as a result of this effort. Therefore, value for money from these collective actions has not yet been demonstrated.”

Trusts’ spending on agency and contract staff has slowed but is still significant at £3.7bn in 2015-16, compared with £3.3bn in 2014-15. According to the NAO, it may take years to resolve workforce issues that affect the successful recruitment and retention of permanent staff, and reduce the need for agency staff.

Financial plan

The Department of Health (DoH) and NHS organisations have to save money by being more efficient to close an estimated £22bn gap between patients’ needs and resources by 2020-21.

The DoH, NHS England and NHS Improvement estimate that they can make £6.7bn of efficiencies by capping public sector pay, renegotiating contracts, implementing income-generating activities and reducing running costs.

They estimate that trusts and commissioners can make a further £14.9bn by moderating the growth in demand for healthcare services and achieving 2% productivity and efficiency improvements. But the NAO said that plans to close the estimated £22bn gap had not been fully tested.

Late payments

In 2015-16 trusts’ balance of net current assets, showing how much capital trusts are generating and using, was negative for the first time. This suggests trusts are finding it difficult to finance their day-to-day operations. Trusts are increasingly struggling to pay suppliers on time with 77% paying their invoices within 30 days in 2015-16, compared with 81% in 2014-15 and 82% in 2013-14, against the department’s target that 95% of invoices are paid on time.

In figures

  • £1.85bn - net deficit of NHS bodies (NHS England, clinical commissioning groups, NHS trusts and NHS foundation trusts) overall in 2015-16
  • £2.45bn - net deficit of NHS trusts and NHS foundation trusts in 2015-16
  • 66% - percentage of NHS trusts and NHS foundation trusts (156 out of 238) in deficit in 2015-16
  • 32 out of 209 (15%) - number of clinical commissioning groups reporting a cumulative deficit in 2015-16 £2.4bn additional funding given to NHS trusts and NHS foundation trusts in financial difficulty as a cash injection, loan or other financial support in 2015-16
  • £1.8bn - funding for financial sustainability available for trusts in 2016-17 from the £2.14bn Sustainability and Transformation Fund
  • £461m - net deficit reported by NHS trusts and NHS foundation trusts in the first three months of 2016-17
  • £14.9bn - savings that NHS trusts, NHS foundation trusts and clinical commissioners need to make by 2020-21 to help close the estimated £22bn gap between patients' needs and resources

What financial plan would you implement to get the NHS back on track?


Replies (3)

Please login or register to join the discussion.

By KWest
25th Nov 2016 22:29

NHS annual expenditure rose from £50 billion in 2000 to £117 billion by 2010, an increase of 134%. So step one of any plan would be to discover exactly what an awful lot of new money was spent on and why, despite further increases taking it to £138 billion this year, things appear to have got worse.

Thanks (0)
By kevin503
02nd Dec 2016 11:08

Um, for "savings" read cuts. The NHS is a large and complex organisation, so without a long and detailed study, my tuppence worth is up there with a "bloke down the pub reckons". However, if a service, any service, is running right up to the edge in terms of capacity and just in time delivery to meet budget constraints, they can often incur large unexpected costs because of this. One example of this is the extensive use of agency nurses (often NHS trained) instead of just employing or retaining extra nurses. This short termism can create long term structural and financial instability.

Thanks (1)
By Mike18
02nd Dec 2016 14:44

Budgeting is an important management tool, but the NHS is much more than a business. The NHS has massive public support for a mission to deliver health care free at the point of use, but it needs a 'financial plan' that is up to that objective. Cutting waste as a result of bad management is unlikely to close the funding 'gap' when demand is ballooning. 'Deficits' are inevitable until it has a more honest, and probably higher, budget.

Thanks (1)