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Government underestimates challenge of delivering NHS plan

3 April 2019

  • Overall financial picture masks worrying disparities in performance of individual trusts and CCGs
  • Staff shortages are a major obstacle to NHS financial viability and delivery of its Long Term Plan
  • Still no clarity on future funding for adult social care, capital, public health and education

Report summary

While the NHS did balance its overall budget in 2017-18, there is a worrying level of disparity in financial health and patient experience at a local level. 

The top-level picture hides warning signs that the NHS' financial health is getting worse: increasing loans to support trusts in difficulty, raids on capital budgets to cover revenue shortfalls, and the growth in waiting lists and slippage in waiting times do not indicate a sustainable position.

It is unacceptable to simply offset surpluses and deficits in the presentation of these overall budget results.

The long-term funding settlement for the NHS and the NHS Long Term Plan present an opportunity to bring back stability to the health system.

However, with about 100,000 current vacancies, the NHS will not deliver against the plan unless it addresses staffing shortages.

These staffing shortages present a major obstacle to the NHS's financial viability and we remain concerned about how the NHS can suitably address these workforce shortages.

Should the NHS continue to lose staff at the current rate, or fail to attract enough employees from overseas, then the situation will rapidly reach crisis point.

The lack of clarity on funding for adult social care, capital, public health and education and training also presents significant risk to the NHS's ability to deliver the long-term plan.

We are concerned that the national bodies – the Department of Health & Social Care (the Department), NHS England and NHS Improvement – painted an overly positive picture of the future financial sustainability of the NHS, lacked detail on delivering the NHS Long Term Plan, and underestimate the challenges the NHS faces in delivering its long-term plan.

Chair's comments

“Voices from the frontline came through loud and clear in our latest examination of NHS sustainability.

“As one hospital trust chief executive put it: ‘Staffing is the biggest challenge we face… it's one of the biggest threats to financial sustainability in the NHS.'

“The Department of Health & Social Care and NHS bodies need to heed these voices and act now.

“Staff shortages are a clear threat to the delivery of the NHS Long Term Plan and by July we expect to see evidence that Government has a plan to address them.

“We remain concerned about the absence of new funding for vital areas of work. Investment in capital, adult social care, prevention initiatives and training will be critical.

“If taxpayers are to be convinced that future Government funding commitments are fit for purpose, then Government must explain how those commitments relate to healthcare priorities locally.

“No one should take solace from a top-level financial picture that, as highlighted by our recent reports on DHSC's accounts and Clinical Commissioning Groups, masks significant local disparities.

“If the Long Term Plan is to be more than just an aspiration then Government must engage fully with the detail and ensure necessary resources are directed to the right places."

Conclusions and recommendations 

Although the NHS nearly achieved financial balance in 2017-18, this overall picture masks the significant disparities in financial performance of individual trusts and CCGs. In 2017-18, NHS England, CCGs and trusts reported a combined deficit of £21 million. Despite this near balanced position, it is not clear that funding is reaching the right parts of the system.  For example, NHS England had an underspend of £1.2 billion, which offset the large deficits of trusts (£991 million) and CCGs (£213 million). The combined trust deficit hides wide variation in performance of trusts from a £77 million surplus to a £141 million deficit, with ten trusts accounting for 69% of trusts' total net deficit. In 2017-18, the Department also gave £3.2 billion in loans to support trusts in difficulty. The NHS Long Term Plan sets out the expectation that the number of trusts reporting a deficit will be more than halved by 2019-20, and by 2023-24 no trust will be reporting a deficit. However, it is not clear how organisations furthest away from breaking-even will be supported to achieve financial balance. We are also concerned that it is overly optimistic to assume that trusts and CCGs will universally break even within five years. Given that in 2017-18, 100 out of 232 trusts were in deficit, this assumption underestimates the levels of improvements trusts and CCGs will be required to make within such a short timeframe.

Recommendation: National bodies need to ensure that planning guidance for 2020-21 clarifies the arrangements and timeline for achieving annual financial balance as well as dealing with historic debt, in those organisations with the largest deficits. NHS England should write to us by September 2019 to provide an update on how this guidance is progressing.

The NHS will not be able to deliver on the Long Term Plan unless it addresses staffing shortages. Trust chief executives consider that staffing shortages in the NHS is the biggest challenge facing trusts and is one of the biggest threats to financial sustainability in the NHS. There are currently around 100,000 vacancies across the NHS, with around 40,000 vacancies for nurses. This has been an ongoing concern for the Public Accounts Committee: as the matter stands, there is little sign of the staffing shortfall improving. The NHS appears to be banking on either drastically improving its retention rate, or attracting more employees from overseas in order to fill the gap. This is a risky strategy. There is no guarantee that enough staff will be recruited from overseas, particularly if working and residency statuses are complicated by the UK's exit from the European Union. The NHS Long Term Plan recognises that the current number of vacancies is unsustainable, and that the NHS will need more staff to make the long-term plan a reality.  Trusts are also concerned about retention of senior clinicians, with one trust's survey indicating that 50% of senior staff are considering reducing the number of hours they work, or not agreeing to additional hours. Furthermore, more clinical staff are planning to leave roles prior to retirement. An NHS review on workforce is expected to be published by NHS Improvement after the 2019 spending review.

Recommendation: The Department should write to us by July 2019, setting out how issues with the recruitment and retention of NHS staff will be addressed and reflected in the workforce strategy.

The long-term funding settlement for the NHS was not accompanied by funding announcements for capital, social care, public health and education and training. The uplift in funding from the long-term funding settlement for the NHS, which equates to an average annual real-terms increase of 3.4%, applies to the budget for NHS England only, and not to the Department's entire budget. Areas not covered by this settlement include funding for capital investment, adult social care, for prevention initiatives run by Public Health England and local authorities, and for doctor's and nurses' training. Spending in these key areas affects the NHS's ability to deliver its Long Term Plan. We are particularly concerned about the impact on local authorities, many of which have had to reduce spend on social care, despite rising demand, because of budget cuts. Funding announcements are expected in the 2019 spending review. Despite the uncertainty in funding for these areas, sustainability and transformation partnerships (STPs) and integrated care systems have been asked to develop five-year plans by autumn 2019, to show how the priorities of NHS Long Term Plan will be delivered locally.

Recommendation: When reporting back to us by the end of July 2019, the Department, along with NHS England and NHS Improvement, should clarify the assumptions that sustainability and transformation partnerships and integrated care systems need to be working to in developing their long-term plans. These include the assumptions on capital, social care, education and training, and public health funding.

We remain concerned that year-on-year transfers of capital allocations to revenue are having an adverse impact on patient services and care. Capital funding covers spending on buying or improving an asset, such as maintaining buildings, facilities and equipment and investing in new technologies. Since 2014-15, the Department has used money originally intended for capital projects to cover a shortfall in the revenue budget. This peaked in 2016-17 at £1.2 billion, is now reducing (£1 billion in 2017-18), and transfers are expected to cease from 2020-21. In 2017-18, trusts estimated that they had accumulated a £6.0 billion backlog in maintenance costs, up from £4.0 billion in 2012-13. There is a risk that trusts are simply storing up problems by sacrificing long-term investment to meet the immediate needs of service provision. The Department, NHS England and NHS Improvement recognise that they need to consider the cost of not upgrading equipment, and the potential impact on patient care from inadequate and poorly maintained equipment and facilities. 

Recommendation: By October 2019, the Department should provide a breakdown of its capital budget for 2019-20 and how this is being earmarked against a specific set of investment priorities and risks such as backlog maintenance.

The rising demand for NHS services is not sufficiently well understood. Demand for health services continues to grow. Local bodies need a good understanding of the reasons for increasing activity if they are to manage and respond to the rising demand. It is known that the ageing population accounts for approximately half of the rise in demand for NHS services across England, but other factors that contribute to rising demand are not fully understood, at a national or local level. Wider socio-economic factors such as housing, employment, and changes to benefits and universal credit, have also been noted as contributing factors to demand. NHS England and NHS Improvement told us that they are asking sustainability and transformation partnerships (STPs) and integrated care systems (ICSs) to plan together to manage and understand the demand for services in their areas, but they struggled to provide us with examples of how they are supporting local areas to do this in practice.

Recommendation: By September 2019, NHS England and NHS Improvement should write to us to set out how they will:

  • help local bodies better understand the demand for services, what is driving that demand and how demand could be better met;
  • ensure that a better understanding of how demand is reflected in resource allocation; and
  • ensure that activity plans of local bodies are realistic and take account of the needs of patients.

The success of integrated care systems may be impeded because they are not statutory bodies, and so rely on the goodwill and effective relationships of the organisations involved. STPs are designed to bring together CCGs, trusts and local authorities, to plan and address local challenges in their area. In 14 areas, where partnership working is most advanced, STPs have evolved into Integrated Care Systems (ICSs). Bodies working together for the benefit of their local populations, rather than working in silos, is the way forward for the NHS. But the legal and regulatory framework for the NHS is not yet compatible with the aspiration for system-wide working. The current system holds individual organisations to account, and it is individual organisations that are subject to inspection by the Care Quality Commission; while ICSs, for example, have no separate legal status and are not subject to inspection. The success of system-wide working will also be crucially dependent on strong and constructive local working relationships between bodies. Where such relationships exist already, they have typically taken several years to develop and there will need to be a step change in partnership working in some areas if, as set out in the NHS Long Term Plan, there are going to be ICSs covering the whole country by April 2021.

Recommendation: The Department, with NHS England and NHS Improvement, should write to us by July 2019 defining the governance arrangements for effective integrated care systems; detail how they will align individual NHS bodies' responsibilities to improve system management including assumptions regarding suggested legislative changes, and how they will support those areas where partnership working is less well developed.

Further information

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