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19.07.17

DH balances books at cost of capital spending falling for third year in a row

The Department of Health (DH) has balanced its books in 2016-17, although this has been achieved against the back drop of another fall in capital spending.

Last year, capital spending stood at around £4.56bn, below its budget of £4.61bn. This spend is a reduction from 2015-16 of around £96m.

And it’s also the third year in a row that capital spending has fallen, down from £5.37bn in 2013-14. Capital expenditure is commonly used for long-term investments like buildings and equipment. Spending has reduced in this area again due to transfers from capital to resource budgets for day-to-day costs of running services.

The DH’s annual accounts also revealed that it underspent by £563m in it Revenue Departmental Expenditure Limit (RDEL), following an overspend in 2015-16.  

“This year has been challenging for the health and care system – the NHS has treated more people than ever before and responded to the needs of an ageing population whilst working to live within its means,” said Sir Chris Wormald KCB, permanent secretary at DH in his overview of the report.

“However, the system has risen to the challenge and in July 2016, NHS England and NHS Improvement set out a new approach for instilling financial rigour following a difficult financial year.

This has seen an overall return to financial balance in 2016-17 and the improvement in financial discipline during 2016-17 has set the direction of travel which the health and care system will need to adhere to over the coming years.”

NHS finances outlook for future ‘incredibly tough’

But Anita Charlesworth, director of research and economics at think tank the Health Foundation, said that financial control had come at a price to services and patients.

“Despite primary care being a priority, last year spending on GP services fell as a share of the health budget and the number of GPs working in the NHS declined,” she said.

“Capital spending has fallen for the third year in a row, with funds being transferred to cover very real day-to-day financial pressures. £1.2bn was transferred from the capital budget to meet day-to-day running costs, and capital spending in the NHS has fallen by more than 20% in real terms over the last three years. Without access to sufficient capital funding the NHS now has an estimated £5bn backlog maintenance bill.”  

Charlesworth also warned that it would become harder and harder to deliver on ambitions set out in the FYFV whilst cash was being plundered from capital reserves to simply keep services running.  

“The financial outlook for the next few years is incredibly tough – funding per person will fall in both 2018-19 and 2019-20 under current spending plans,” she continued. “The acute financial pressures facing the NHS mean that it is difficult to see how the government can deliver on its commitments to deliver parity of esteem for mental health, improve primary care and transform health services for patients across the country.”

“Before the election the government committed to additional capital funding and an increase in spending on day to day running costs. Additional investment will be vital if the NHS is to deliver on its vision to improve and transform services for patients.”

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