Hospital Dr News

NHS provider deficit £3bn higher than reported due to one-off funding boosts

NHS trusts ended last year with an underlying overspend almost £3 billion more than was reported in their official accounts.

This is the conclusion of a new analysis by the Nuffield Trust, which warns that without more funding for the NHS, hospitals are unlikely to recover any time soon.

The Nuffield Trust briefing, The Bottom Line, is based on analysing the accounts and financial data published by NHS regulators.

By stripping out temporary funding boosts and one-off savings, it finds that NHS trusts ended last year (2016/17) with an underlying overspend of £3.7 billion. This was far higher than the £791 million reported by NHS regulators.

The analysis goes on to show that providers will be hit with £2.2 billion in unfunded inflation this year (2017/18) – £500 million higher than was planned.

As a result, they will need to cut their operating costs by 4.3% within this financial year to meet their targets, equivalent to £3.6 billion in total savings.

Even if they managed that, they would still require a further £1.8 billion of extra “sustainability” funding in order to meet their target headline deficit of £500 million.

This follows Jim Mackey’s more positive interpretation of NHS finances. The CEO of NHS Improvement NHS said providers were on course for a deficit of £523 million at the end of 2017/18, and described the performance as “very encouraging”.

The Nuffield Trust briefing warns that although trusts have repeatedly delivered large efficiencies, improving their financial position by £2.3 billion last year, they have never before managed savings at this level.

In recent years they have been relying increasingly heavily on one-off savings and paper-based savings from accountancy changes, it says.

Even if trusts continue to make savings at a relatively high rate historically, they will still run up underlying deficits for the foreseeable future and will remain more than £2 billion in the red, in underlying terms, in 2021.

This underlying deficit could be as high as £3.7 billion if inflation continues to rise faster than NHS regulators anticipated.

Nuffield Trust Senior Policy Analyst and briefing author Sally Gainsbury said: “The official figures on NHS deficits don’t reflect how severe things are for hospitals in England, as the deficits reported include one-off funding boosts or savings that cannot be repeated the following year. Only by looking at the deficit after these have been stripped out can we see the scale of financial challenge facing the NHS– and it is eye watering.

“NHS trusts have made billions of pounds of efficiency savings every year, but these have been largely absorbed by inflation, and reductions in the cash paid to them per patient.

“Yet increasing funding to wipe out these deficits and fund much-needed reform in the NHS is entirely possible and wouldn’t even increase the proportion of our country’s wealth spent on health care. Our hospitals are undoubtedly in financial crisis. But the solution to that crisis is not beyond the reach of the public purse.”

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