News

FYFV ‘outdated’ as CIPFA predicts NHS deficit could reach £16bn

The NHS deficit is likely to be much worse than previously expected despite measures to relieve it, the Chartered Institute of Public Finance and Accountancy (CIPFA) has said in its latest report on NHS finances.

The report, ‘More Medicine Needed’, says that the NHS deficit will be at least £5bn by 2020, and is more likely to be £10bn or £16bn in a worst-case scenario.

CIPFA also warned that the Five Year Forward View, introduced to reduce pressures on the NHS by encouraging it to promote healthier lifestyles, is out of date because the service has faced new pressures since the review was published in 2014. It is based on an estimate that financial pressures on the NHS are at £30bn, and CIPFA estimates they are in the £35bn - £40bn range.

Rob Whiteman, chief executive of CIPFA, said: “The UK spends among the lowest of any developed nation on health, it is not enough. To protect the NHS, and the considerable value for money it offers, the government must show leadership.”

The report said that pressures on the NHS include increased staffing costs, with a 1% increase in nurses and a £4.6bn increase in spending on temporary staff in 2013-14.

The government has now introduced a cap on agency spending, but it was not implemented on three-quarters of shifts in the first ten weeks after its introduction.

Also, tariff prices did not inflate in 2009-15, leaving providers to meet increased costs through efficiency savings. Although the tariff has now increased by 1.1%, this may simply transfer financial pressures to CCGs, whom the report warned are suffering from a lack of experience and being smaller than their predecessors, primary care trusts.

CCGs have been promised a £1.5bn increase in funding, but will receive nothing this year and only £0.1bn in 2017-18.

Change in leadership attitude needed to address financial crisis

More generally, the report warned that the NHS suffers from ­“a focus on short-term cost savings and a lack of progress on more transformational change”.

CIPFA therefore recommends a number of key leadership changes to address the financial challenge, including updating the Five Year Forward View based on more “analysis and honest assessment” of the financial situation of the NHS, and more public health funding to reduce problems in the long term.

It calls for the government to establish an independent commission, which will consider “radical” options for NHS funding and establish a “golden ratio” for health and social care funding.

It also says that funding should be re-prioritised, with more given to elderly people’s services to support an ageing population.

The latest NHS performance figures show that the deficit is at £2.45bn, almost three times greater than last year’s.

A Department of Health spokesperson said: “We know finances are challenging, but we are committed to the NHS which is why we’re investing £10bn to fund its own plan for the future, including nearly £4bn this year.

“Our clampdown on expensive agency staff and management consultants is starting to have an impact in helping trusts, but hospital leaders must continue to show grip to ensure finances are placed on the same footing as quality of care and so every penny possible goes to the frontline.”

Have you got a story to tell? Would you like to become an NHE columnist? If so, click here.