NHS Finance

Key challenges remain as much of GM budget surplus owed to one-off measures

Despite finishing 2016-17 in a strong financial position in the face of significant issues in the NHS locally and nationally, Greater Manchester Health and Social Care Partnership (GMHSCP) has warned that much of this has been generated through one-off measures – meaning the current year remains “very challenging”.

In board papers released ahead of its board meeting on 30 June, GMHSCP revealed that the region delivered a surplus of £237m in the last financial year, which is £157m better than planned.

This success was owed to a “strong financial performance in all sectors” including CCGs (£46m better than planned), providers (£107m), and the organisation’s central budgets (£4m), while councils reached a break-even position.

But much of these surpluses were a direct result of one-off savings. Providers, for example, saw their budgets boosted by a national and non-recurrent £60m sustainability and transformation funding (STF) as a reward for excellent performance by individual trusts.

CCGs also benefitted from the injection of a risk reserve of £42m held back under NHS England’s direction in order to offset cash pressures within the provider sector in GM and beyond.

As well as being used to help the NHS balance its books, the additional surplus will remain available for GM organisations to invest in capital and other programmes in the coming years.

But it is unlikely that the current financial year of 2017-18 will deliver similar returns without careful planning and financial management.

“Whilst the financial performance in 2016-17 represents a real success for GM and is testament to the benefits of a collaborative approach to managing financial risk across the partnership, much of the surplus has been generated through one off measures and additional national funding,” the board paper explained.

“It is important to recognise that 2017-18 remains a very challenging financial year and the robust management of organisation, locality and GM finances will continue to be critical if the performance is to be maintained and we are to deliver our goal of clinically and financially sustainable care.”

GM’s outlook is symptomatic of a nationwide issue, with trusts finishing 2016-17 with a deficit of £791m – a far cry from the £2.45bn the year before – as a result of one-off, non-recurrent savings.

Chris Hopson, chief executive of NHS Providers, revealed in May that two-thirds of trusts told his organisation in quarter 3 of the last financial year that they were ‘very’ or ‘fairly’ reliant on these one-off fixes to meet their year-end figures. He believes that this accounts for about £1bn of the estimated gain.

Nevertheless, national bodies have praised the health sector for being on the right track to deliver significant efficiencies and improved cash management. NHS Improvement has now indicated, for example, that it will begin moving towards a more quality-focused stage as a direct result of the system’s “fantastic efforts” in slashing deficits over the past year.

But, as the organisation’s CEO Jim Mackey put it during NHS Confed17, providers will have to deliver these cost reductions all over again this year, as 91% of them earned STF in 2016-17 and 74% managed to hit or exceed their control totals.