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NHS commissioners and providers warn of ‘rapidly deteriorating’ finances

NHS finance directors have warned that both commissioners and providers across the health service are forecasting a worsening 2014-15 year-end financial position compared to 12 months ago. 

The Healthcare Financial Management Association’s (HFMA’s) latest NHS Financial Temperature Check report revealed that nearly two-fifths (39%) of commissioner and 74% of trust finance directors are predicting a worsening  year-on-year financial position. 

On top of this, 38% of commissioner and trust finance directors forecast a worse 2014-15 year-end position than was originally planned at the start of the year. 

Finance directors reported that the main causes of the decline are unforeseen increases in pay costs, combined with lower than expected savings from cost improvement plans. 

In fact, of the 191 finance directors that took part in  the report, 82% of them say the pressure on pay costs is chiefly due to increasing agency staff costs, while the main cost pressures facing chief finance officers in clinical commissioning groups (CCGs) are continuing healthcare costs (72%) and emergency care costs (70%). 

Paul Briddock, director of policy at the HFMA, said that the research, which was conducted before the government announced plans for an extra £2bn for the NHS in 2015-16, revealed a rapid deterioration in the financial position of the whole NHS system during this financial year. 

“While we welcome the recent announcement of additional funding for 2015-16, there is no quick fix,” he added. “There must be an open and honest debate about how this money should be spent, and the importance of not only maintaining existing service and quality, but ensuring fundamental transformation of the service. The future success of the NHS depends on fast and effective clinically led transformation of services and clear, aligned system leadership.” 

The HFMA report highlighted that the NHS foundation trust sector has reported a deficit of £254m against a planned deficit of £59m; and the NHS trust sector reported a deficit of £376m against a planned deficit of £317m at the half way point of the 2014-15 financial year.  At this point 55% of foundation trusts and 27% of NHS trusts were reporting a deficit. 

In response to the report, Siva Anandaciva, head of analysis at NHS Providers, formerly the Foundation Trust Network, said: “Today’s report is a timely reminder of the strain providers of NHS acute, ambulance, community and mental health services are under. Even organisations with strong financial track records are now experiencing financial distress with some providers handing in their first deficit plan for 15 years. This reflects the increasing system-wide pressures on frontline services. 

“The fact that 74% of trust finance directors are forecasting a worse financial position in 2014-15 compared to the previous year reflects the scale of the financial deterioration.” 

It was added that NHS providers are investing in more clinical staff to maintain the quality of services and meet rising demand, but without changes to the payment and funding system to support this investment the financial pressures on the frontline will continue to escalate. 

Julie Wood, director of NHS Clinical Commissioners, told NHE: “We know from a number of recent member surveys that although CCGs managed to balance their books in 2013-14 (with a 0.1% underspend), their confidence in achieving a required 1% surplus in 2014-15 and 2015-16 is decreasing.” 

She added that this is attributed to a number of different challenges CCGs are facing, including short-term funding arrangements, the impact of different funding methodologies, the need for more aligned NHS finances for commissioners and stopping the in-year allocation adjustments from NHS England that they have had to deal with to date. 

“Commissioners have their own statutory responsibility to balance their budgets but they also need to be supported through a place based approach to commissioning budgets and longer term funding settlements,” stated Wood. “We support the NHS Confederations call for a ten-year settlement on the NHS, which would give commissioners financial certainty to plan health services.”

Prior to the chancellor announcing the latest £2bn funding, the King’s Fund reported that an NHS financial crisis was “inevitable” in the next financial year without new money. 

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