How is the NHS performing?
With the NHS heading for the end of the financial year, the evidence from our latest survey of finance directors suggests widespread pessimism about the state of NHS finances and performance.
Finances remain the dominant issue for the NHS as a whole. As the NHS Trust Development Authority and Monitor report, net provider overspending in the second quarter of this year amounted to £1.6 billion (Figure 1), with 76 per cent of all NHS provider organisations overspent – including 95 per cent of all acute trusts (NHS Trust Development Authority 2015; Monitor 2015). While forecasts would suggest an end-of-year overspend of around £2.2 billion (around 3 per cent of provider spend), planning guidance aims now to contain this to £1.8 billion (NHS England et al 2015).
With an average overspend across all providers running at around £9 million a day six months into the year, there is huge pressure to meet this target. As the planning guidance makes clear, if all deficits are to be eradicated by the end of 2016/17, providers will be under intense pressure from NHS England, NHS Improvement and other national bodies to reduce spending while meeting performance targets and accelerating plans for transforming services in line with the NHS five year forward view (Forward View). The urgency of the financial situation is reflected in a marked return to hands-on central control: while there will be extra money next year following the Spending Review settlement, more than half of the increase will be allocated to trusts to sort out deficits on the basis of tough cost reduction targets.
Data source: Department of Health Annual Accounts and Monitor and NHS TDA Board papers
Financial prospects for 2015/16
Our latest survey of finance directors, carried out after the main planning guidance for 2016/17 was published (but spanning publication of various additional guidance documents such as the announcement of control totals for all providers), shows that 67 per cent expect to overspend by the end of this year – including 89 per cent of acute trusts. The net overspend across our sample of providers suggests they will overspend by £721 million, with more than 98 per cent of this (£708 million) forecast for acute trusts. Despite the aim of the planning guidance to contain overspending at £1.8 billion, scaling up our survey results across all providers suggests an overall deficit of around £2.3 billion by March this year.
While commissioners’ finances have been and remain less seriously challenged than providers’, our survey confirms the forecasts in the September survey that around 18 per cent of CCGs predict an overspend by the end of the year – twice the proportion from our June survey.
Meanwhile, pressures on secondary care providers continue to rise – as is evident from increasing trends in referrals and hospital activity. While more work means more income for providers, year-on-year real reductions in the tariff have attenuated income growth. However, rising trends in activity have outstripped real increases in NHS funding over the past few years – evidence of improved productivity (Figure 2).
Data source: Monthly hospital activity www.england.nhs.uk
Nevertheless, on the supply side, while cost improvement programme (CIP) targets for trusts remain at around 4.5 per cent of income, over the past four years there has been a broadly increasing trend in the proportion of finance directors reporting worries about meeting their CIP targets. The proportion of trust directors who say they are very or fairly concerned about meeting their savings target is 53 per cent – with the number very concerned (38 per cent) at its highest level since our surveys began. More broadly, both CCG and trust finance directors remain sceptical of the ability of the NHS as a whole to meet the efficiency targets set out by the Forward View over the years to 2020/21; around two-thirds thought there was a high or very high risk of failing to meet the 2 to 3 per cent annual efficiency target.
Part of the national strategy to improve achievement of CIPs has been the imposition of a trust-by-trust cap on agency staff spending (Department of Health 2015). However, more than half (53 per cent) of finance directors are fairly or very concerned that they will not be able to contain agency spending within their limits and more than 20 per cent thought the agency limits would affect their ability to recruit the staff they would need to provide safe care to patients.
While financial issues dominate the agenda for all NHS organisations, other worries persist. For example, asked whether patient care had improved, stayed the same or got worse over the past year in their local area, a majority – 53 per cent – of trust finance directors felt it had got worse – the highest proportion since our surveys began. And asked to identify their top three current concerns, trust finance directors list the four-hour waiting time target in A&E, delayed transfers of care and staff morale. This is a change from our past few surveys, with concern about A&E doubling – perhaps a reflection of winter pressures and growing problems in meeting the waiting time target (Figure 3).
Concern about A&E waiting times comes at a time when NHS England has dropped official weekly reporting of waiting times in favour of monthly reports published six weeks in arrears – despite the fact that weekly data is still compiled at local level. This has made it more difficult to monitor performance. However, the latest monthly statistics show a continuing increase with 9 per cent of patients waiting more than four hours; the target is 5 per cent. The target has now been missed every month (apart from one) since August 2014.
Waiting times endured by A&E patients are symptomatic not so much of problems in emergency departments, but of problems with flow through the hospital system and in particular a squeeze on key resources – beds and staff – in other parts of the hospital. And indeed, the new elective waiting target has been breached across the country in December for the first time since it became the sole elective waiting time target last summer (Figure 4).
- Overall, our survey suggests that it is doubtful whether providers are able to meet the £1.8 billion deficit target. Additional funding of £205 million and a transfer of £950 million from capital to revenue budgets within the year will help to ameliorate provider overspending (HM Treasury 2016). There is, however, a serious possibility that the Department of Health’s expenditure limit will be breached this year. In any case, supporting overspends in one part of the system with capital transfers is at best a very short-term solution to the funding problem the NHS faces.
Looking beyond this financial year, the Spending Review has now provided a settlement for the NHS to 2020/21. While the government has chosen to provide an additional £8 billion (in fact, £8.4 billion) for NHS England – £22 billion less than the estimated funding demand to 2020/21 – this change is based on 2020/21 prices, a somewhat unconventional way of calculating real changes for public spending. The real increase for NHS England also depends on real cuts of £3.4 billion in non-NHS England spending, such as capital expenditure, the budgets for Health Education England, Public Health England and arm’s-length bodies such as the Care Quality Commission (CQC) and the National Institute for Health and Care Excellence (NICE). Using 2015/16 prices, the overall real increase for the NHS as a whole by 2020/21 will in fact be just £4.5 billion.
NHS England also asked for this parliament’s settlement to be frontloaded. As Figure 5 shows, 44 per cent (around £2 billion, at 2015/16 prices) of the £4.5 billion increase will be allocated next year, with considerably less in later years – especially in 2018/19 and 2019/20 when real funding increases drop to just £240 million and £141 million respectively. This is a net figure; NHS England will see an increase of £3.7 billion next year and other spending areas a reduction of around £1.7 billion.
Data source: King’s Fund estimates based on HM Treasury Spending Review 2015
Department of Health (2015). ‘Clampdown on NHS staffing agency costs.’ Available at: www.gov.uk (accessed on 14 October 2015)
HM Treasury (2016). Central government supply estimates 2015-16: supplementary estimates. HC-747. London: HM Treasury. Available at: www.gov.uk (accessed on 11 February 2016).
Monitor, NHS Trust Development Authority (2016). Delivering the Forward View: NHS planning guidance 2016/17 to 2020/21. Annex 5 to the technical guidance: NHS Improvement guidance on provider operational plans 2016/17. London: Monitor. Available at: www.england.nhs.uk (accessed on 11 February 2016).
Monitor (2015). Quarterly report on the performance of the NHS foundation trust sector: 6 months ended 30 September 2015 [online]. GOV.UK website. Available at: www.gov.uk (accessed on 5 February 2016).
NHS Trust Development Authority (2015). Quarterly report on the performance of the NHS foundation trusts and NHS trusts: 6 months ended 30 September 2015. Available at: www.ntda.nhs.uk (accessed on 5 February 2016).
NHS England, NHS Improvement (Monitor and the NHS Trust Development Authority), Care Quality Commission, Health Education England, National Institute of Health and Care Excellence, Public Health England (2015). Delivering the Forward View: NHS planning guidance 2016/17–2020/21. Available at: www.gov.uk (accessed on 15 February 2016).