Additional funding aimed to help the NHS get on a financially sustainable footing has instead been spent on coping with existing pressures, according to the National Audit Office’s (NAO) report, published today.
The NHS received an additional £1.8 billion Sustainability and Transformation Fund in 2016-17 to give it breathing space to set itself up to survive on significantly less funding growth from 2017-18 onwards. It was also intended to give it stability to improve performance and transform services, to achieve a sustainable health system.
The Fund has helped the NHS improve its financial position from a £1,848 million deficit in 2015-16 to a £111 million surplus in 2016-17. Within the overall position, the combined trust deficit reduced to £791 million in 2016-17 from £2,447 million in 2015-16. There has also been an improved underspend of £154 million across clinical commissioning groups, yet 62 groups reported a cumulative deficit in 2016-17, up from 32 in 2015-16.
The report adds that despite its overall financial position improving, the NHS is struggling to manage increased activity and demand within its budget and has not met NHS access targets. Furthermore, measures it took to rebalance its finances have restricted money available for longer-term transformation, which is essential for the NHS to meet demand, drive efficiencies and improve the service. For example, the Department transferred £1.2 billion of its £5.8 billion budget for capital projects to fund the day-to-day activities of NHS bodies.
On top of this funding, many trusts are receiving large levels of in-year cash injections, most of which are loans from the Department, which have worsened rather than improved their financial performance. Extra cash support increased from £2.4 billion in 2015-16 to £3.1 billion in 2016-17.
Clinical commissioning groups and trusts are increasingly reliant on one-off measures to deliver savings, rather than recurrent savings that are realised each year. Between 2014-15 and 2016-17 the percentage of savings that were non-recurrent increased from 14% to 17% for commissioners, and from 14% to 22% for trusts. This poses a significant risk to the financial sustainability of the NHS in the future.
Amyas Morse, head of the National Audit Office, warned that "Repeated short-term funding-boosts could turn into the new normal, when the public purse may be better served by a long-term funding settlement that provides a stable platform for sustained improvements".
Responding to the report, Niall Dickson, chief executive of the NHS, said: “The NAO has added to a long line of reports lamenting the state of health and care. We have passed the point in which politicians needed to be honest with the public about what faces us now and what will face us in the future. There is an urgent need to deal with the short-term crisis in the system but also to address the challenge we face over the next decade."
Meanwhile, Liz McAnulty, chair of the Patients Association, said: “The NAO's report confirms not only the inadequate, hand-to-mouth nature of the NHS's finances, but also that this cash crisis is obstructing service transformation.
“It is essential for patients that NHS services are transformed to meet changing patterns of need. In particular, older people with multiple long-term conditions need to be kept well in the community, rather than being left until they reach a crisis and then hospitalised."
The report notes that progress has been made in setting up 44 new partnership arrangements across health and local government, which are laying the foundations for a more strategic approach to meeting the demand for health services within the resources available. In reality, partnerships’ effectiveness varies and their tight financial positions make it difficult for them to shift focus from short-term day-to-day pressures to delivering transformation of services.
The NAO has made a number of recommendations to the Department, NHS England and NHS Improvement in its report, which includes moving further and faster towards aligning nationwide incentives, regulation and processes, as well as reassessing how best to allocate the sustainability and transformation funding.