Financial strain putting NHS at risk warns National Audit Office

The financial position of the NHS has worsened since 2012-13, with growing financial stress in NHS trusts and foundation trusts. And such trends are not sustainable, says a new report by the UK's National Audit Office (NAO).

Chair of the Public Accounts Committee, Margaret Hodge, called 'The financial sustainability of NHS bodies' report "deeply alarming", adding that under such financial constraints, it was quality and safety of patient care that suffered.

At the end of June 2014, NHS trusts were forecasting a net deficit for the current financial year of £404 million and foundation trusts a net deficit of £108 million, the report found. This compares with initial plans of a net deficit of £425 million for NHS trusts and £20 million for foundation trusts.

Amyas Morse, head of the NAO, explained, "An increasing number of healthcare providers and commissioners are in financial difficulty. The growth trend for numbers of NHS trusts and foundation trusts in deficit is not sustainable. Until the Department [of Health, DH] can explain how it will work with bodies such as NHS England, Monitor and the NHS Trust Development Authority to address underlying financial pressures, quickly and without resorting to cash support, we cannot be confident that value for money will be achieved over the next five years."

Trusts in surplus in 2013-14 were likely to have a lower surplus than in the previous financial year. The number of trusts and foundation trusts with a surplus also fell from 222 in 2012-13 to 182 in 2013-14.

The report noted that financial risk is increasing in NHS trusts and foundation trusts, and those in severe financial difficulty continue to rely on extra cash support from the DH. In 2013-14, this amounted to over £0.5 billion extra money issued to 21 NHS trusts and 10 foundation trusts.

NHS England underspent by £279 million compared with its original plan but, within this net total, it overspent £377 million on specialised services. The over spend was partly owing to over-ambitious planning assumptions. NHS England offset this pressure through use of its reserves. A total of 49 clinical commissioning groups performed less well than originally planned. Of these, 12 had forecast a surplus but ended the year in deficit. The local auditor of clinical commissioning groups referred 19 bodies in deficit to the Secretary of State for spending more than their authorised resource limit.

To discourage unnecessary emergency admissions, trusts receive 30 per cent of the full tariff payment for admissions above the level experienced during 2008-09. However, this arrangement has not contained demand, the report found, adding that increasing demands for emergency admissions would reduce the resources commissioners had for alternative primary or community care services.

Some NHS bodies had not made large enough cost savings, or contained the increasing demand for services within their available funding, while meeting quality and access targets.

Considerable uncertainty remains around the impact of initiatives such as the Better Care Fund, which the DH and NHS England expect will reduce demand for acute hospital services.

The DH has a budget of £115.1 billion for next year – just over £2 billion more than this year. David Cameron has pledged to maintain funding of the NHS for the duration of the next parliament if he is in charge, although that will mean other budgets suffer.

Labour has promised an extra £2.5 billion a year if it gains power at the General Election next year.

The NAO will look again at the planning process for commissioners and providers in 2015 to determine how well regulatory bodies are checking consistency between different parts of the health and social care system.

However, the NHS is facing a £30 billion deficit by 2020.

Read the full NAO report here: The financial sustainability of NHS bodies

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Increase NHS funding or face £30 billion shortfall, politicians warned