Following the Money: NHSE is ‘trying to hide the reality’ of health service finances

Briefing ahead of the budget later this month suggests there may be some money for Labour’s flagship waiting list pledge, as well as promises of capital in future years.

But there is no sign of anything to help fix the rapid in-year deterioration in NHS finances, which could eat up any extra cash the chancellor might be able to raise. As reported earlier this week, the deficit at trusts and integrated care boards now stands at just under £2bn, already close to its £2.2bn annual target after four months of the year.

While it’s not uncommon for financial plans to plot early deficits followed by a recovery in the last half of the year, finance chiefs said this year was particularly risky, in part because of the rush to settle 2024-25 spending plans and NHS England’s late notice overhaul of the financial regime.

One system boss said: “The level of back-loaded efficiencies reflects the very challenging planning process where systems had to agree to big plan improvements very quickly to close the national planning gap.

“Systems are working really hard to hit the plans, but the levels of savings needed in a short space of time are not achievable safely, especially over winter. It’s difficult to see how the NHS will be anywhere near hitting the plan this year, but that’s not being talked about anywhere officially.”

Notably, they said that integrated care system chiefs were often in the dark about the relative performance of their neighbours.

They added: “NHSE don’t even share meaningful national financial performance data anymore, which we all assume is to avoid this reality being widely understood, and to keep systems isolated so that they can be told it’s only them that has the problem.”

It’s a frustration shared by Following the Money. Public updates on local financial performance were historically published regularly by NHS Improvement, now absorbed into NHSE. The national body has committed to resuming these, although it is yet to publish anything past December 2023.

NHSE’s budget is ‘entirely implausible’

Julian Kelly, the NHS chief financial officer, is expected to provide an update on the national financial position at its board later this week. It is likely to focus on the variance to plan so far this year, which is not far off £500m, and say this is partially down to industrial action.

As ever, strikes are only part of the explanation. ICSs are understood to have received around £90m to cover off the impact of strikes, which some local leaders said this did not meet all their costs but was still a relatively minor part of the overall picture.

Another headache is the allocations for the pay deal, which are thought to be slightly off due to the allocations not covering temporary staff costs, which will also go up. Spending on staff costs over and above plan are not covered, one source said, meaning that the many trusts in deficit now face an additional pressure.

Another said the gap was worse in mental health and community trusts, where staff account for a higher proportion of costs.

But the overall problem is the rate of spending, which will have to fall dramatically if there is any chance of sticking to the £2.2bn target set by NHSE (and which the investigation and intervention programme is trying to address).

NHSE has told local systems it can cover the £2.2bn but has no funding available for anything beyond this. In practice it will inevitably be holding some further cash, or at the very least a list of projects and transformation funds that can be cancelled or clawed back.

Sally Gainsbury, senior policy analyst at the Nuffield Trust, said the unusually high planned deficit was a function of a wider NHS budget that was “entirely implausible”, meaning ICSs received artificially low allocations.

She said: “As a consequence, NHS England has had to effectively top-slice a huge proportion of it to hold as a risk reserve against the planned system deficit. This is understandable as a response to the choices taken by politicians earlier in the year to duck the issue of adequately funding the health service.

“But an inevitable outcome is that systems will be looking up to NHSE to bail them out rather than feeling this is something that is reasonably within their own control.”

Ms Gainsbury said a better measure was to look at the provider cost base, which has been growing faster than NHSE’s overall budget. If this trend continues, she estimates that NHSE could face a £4.4bn immediate cost pressure, after taking account of the pay deal.