The consequences of living within your means

The technicality (or ‘administrative error’ as the National Audit Office described it) that enabled the Department of Health to avoid breaching expenditure controls set by parliament may have spared it from the full wrath of the National Audit Office, MPs and the Public Accounts Committee; but it did little to hide the bottom line – a serious financial crisis engulfing the NHS.

In 2015/16, NHS providers overspent by an eye-watering £2.8 billion (reduced to £2.5 billion by one-off measures). Although a commissioning underspend of £700 million helped to offset this figure, the NHS (commissioners and providers in aggregate) still ended 2015/16 with the largest deficit in its history.

After a period during which ministers had given providers a green light to recruit more staff and, in effect, turned a blind eye to overspending, it has become clear that – in theory at least – restoring financial balance is the priority for 2016/17. With Jim Mackey, Chief Executive of NHS Improvement, recently admitting that the provider sector will once again be in deficit this year, the pressure on the national bodies to get a grip on the finances once and for all could be hardly greater. And so alongside the Department’s accounts we saw NHS Improvement and NHS England jointly launch an ‘NHS reset’ in an attempt to exert control over financial and operational performance.

For providers, many of the measures in the reset read like ‘more of the same’ given the dramatic extension of central control that has already taken place over the past year or so. These include greater capital controls, plans to consolidate pathology and back-office services, and further attempts to drive through control totals. More significantly, plans to tackle ‘excessive pay bill growth’ among 63 providers indicate that, for some trusts, cuts to clinical staff will become a reality rather than an option. This aspect of the reset has already provoked public concern from several of the trusts on the list, which includes some trusts that are generally viewed as high-performing, as well as a few whose chief executives are leaders of sustainability and transformation plan footprints. Similarly, the new financial special measures regime aims to force the 24 providers who are still to agree to their control totals to finally acquiesce, regardless of the reasons underlying their hesitance. The introduction of ‘improvement trajectory tolerances’ amount to a relaxation of some waiting times standards for providers, exempting them from fines for non-compliance while they seek to improve performance over the course of the year. These measures represent a clear shift in rhetoric from the post-Francis era, during which quality, often synonymous with staffing levels, was paramount. Whether in reality national bodies will have the nerve to force reductions in clinical staff is of course yet to be tested.

Unlike previous moves to exert financial control which have focused on providers, the reset also has significant implications for commissioners. At the very least, clinical commissioning groups (CCGs) and their accountable officers will be subject to much closer scrutiny, with the first tranche of CCG ratings published alongside the reset. The requirement for CCGs to contribute to the efficiency challenge has also been upped, with efficiency levels of three per cent assumed this year and new restrictions on spending. The findings of our most recent quarterly monitoring report suggest that this may be overly ambitious: just under two-thirds (61 per cent) of all CCG finance leads expressed concern about achieving their savings plans this year. Moreover, the new regime of special measures for commissioners (targeting both financial and operational performance issues) includes interventions ranging from dismissing a CCG’s accountable officer to disbanding it entirely and transferring its functions to a neighbouring CCG. It is not clear how this sits with the moratorium on voluntary CCG mergers imposed by NHS England up to now.

However, it is important to recognise that this ‘reset’ is not the first attempt by the national bodies to impose spending restraint. The new measures are just the latest in a series of efforts that began last summer with caps on agency spending, and were followed by those announced in and around the NHS planning guidance, for example, turnaround teams and caps on management consultancy contracts.

With no sign of additional funding on the horizon, national bodies are left with little option other than to double up on their efforts to deal with overspending. However, the strategy underpinning these efforts seeks to treat the problem as one of widespread mis-management by an NHS that refuses to accept the concept of finite budgets. This fails to recognise the real problem – that at the root of the current financial mess is the fact that funding has not kept pace with demand. It is simply not credible to argue that the NHS can continue to meet increasing demand for services, deliver current standards of care and stay within budget. If the government’s priority is to restore financial balance then something else will have to give. But when the cost of this control becomes apparent, will national leaders and politicians really be prepared to pay?

Keep up to date

Subscribe to our email newsletters and follow @TheKingsFund on Twitter to see our latest news and content.

Comments

#547976 kevin riley
Retired Public Sector Solicitor and User and active Supporter of Doctors and Nurses working in the NHS
N/a

THE NHS IS SHORT OF FUNDS FOR TWO REASONS - FIRSTLY BECAUSE THE GOVERNMENT WISHES IT TO BE SO - SECONDLY BECAUSE FAR TOO MUCH MONEY (CIRCA 60%) OF TAXPAYERS MONEY IS PAID ON EMPLOYING ON CHIEF EXECUTIVES (OVER 165 OF THEM) AND OTHER "MANAGEMENT" PERSONNEL THAN IS SPENT ON FRONT LINE SERVICE DELIVERY STAFF.

YOUR REPRESENTATIVE STATED ON THE NEWSNIGHT THAT ONE RESULT OF BREXIT WAS THE REQUIREMENT TO MAKE FURTHER SO CALLED "SAVINGS" TO THE AMOUNT THE GOVERNMENT IS PREPARED TO ALLOCATE TO THE NHS.

NO ONLY IS THE ABOVE WRONG IN FACT BUT IT IS ALSO LEGALLY INCORRECT AS IT IS OPEN TO THE GOVERNMENT TO ALLOCATE AS MUCH AS IT LIKES EACH YEAR TO THE NHS OUT OF THE OVERALL AMOUNT IT RECEIVES IN TAXES EACH YEAR.

THE REALITY IS THAT THE UK IS RANKED ONE FROM THE BOTTOM IN THE AMOUNT IT SPENDS EACH YEAR ON THE NHS AS COMPARED TO THE OTHER 15 ORIGINAL MEMBERS OF THE EU.

So far as the level of spending on the NHS in the UK is concerned (given the differences in the way countries fund their health care) it is usual to compare total spending (public plus private) expressed as a proportion of countries’ GDP.

On this basis, data from the OECD shows that in 2013 (the latest year for which figures have been published) the UK spent 8.5 per cent of its GDP on public and private health care. (This excludes capital spending equivalent to 0.3 per cent of GDP to make figures comparable with other countries’.)

•AS ALREADY MENTIONED This places the UK 13th out of the original 15 countries of the EU on the amount it spends on the NHS

THE ABOVE ALSO CONCLUSIVELY ESTABLISHES THE FACT THAT JEREMY HUNT IS "NOT TELLING THE TRUTH" ABOUT HIS AND THE GOVERNMENTS BEHAVIOUR TOWARDS THE NHS.

THE ABOVE INCLUDING HIS MISREPRESENTATION ABOUT HIS ABILITY TO GUARANTEE ANY IMPROVEMENTS IN THE NHS.

SINCE THE HEALTH AND SOCIAL CARE ACT 2012 NEITHER HE, THE GOVERNMENT, THE DEPT OF HEALTH NOR NHS ENGLAND HAS ANY POWER TO CONTROL HOW THE NOW LEGALLY INDEPENDENT NHS FOUNDATION TRUSTS BEHAVE.
HE AND THEY CAN ONLY "ADVISE OR RECOMMEND" BUT CAN DO NOTHING IF THE CHIEF EXS OF THESE TRUSTS CHOOSE TO IGNORE THAT ADVICE OR RECOMMENDATION.

IN ADDITION TO THE ABOVE, THE SUGGESTIONS MADE AS TO HOW "SAVINGS" COULD BE ACHIEVED AMOUNTED TO THE COMMISSION OF A SERIOUS CRIMINAL OFFENCE BY THE -CHIEF EXECUTIVE OR OTHER SENIOR MANAGER MAKING THAT DECISION

.The already identified (by the Public Accounts Select Committee) dangerous shortage of front line “operational” staff in the NHS is likely to worsen and the appalling existing number of legally “preventable” deaths increase if the criminal law is not enforced as a result of the current perceived (but legally invalid) need to “save” billions of pounds from the already overstretched NHS Budget.

Legally any Government can decide to spend as much of the tax payer’s money that it receives each year as that Government wishes – it is merely a matter of determining priorities.

A perceived need to make “savings” is no defence to the crime of manslaughter caused by a failure to comply with the overriding duty of care that a Chef Executive owes to that deceased individual..

The common factor in virtually all of the negative reports of the Care Quality Commission on individual NHS Foundation Trusts since 2013 has been their identification of the Chief Executives of the now “independent” organisations (although all funded by the tax payer) not employing sufficient front line staff in all “service delivery” areas to enable proper care to be provided.

In many instances this culpable failure has directly led to “preventable” deaths – each of which amounts to the commission of a serious criminal offence by the Chief Executive and/or senior manager “in charge”..

.In every other environment where such preventable deaths occur the Police routinely investigate and the Director of Public Prosecutions prosecute the individual Chief Executive/Senior manager in charge of the organisation where these preventable deaths have occurred

DESPITE WHAT WAS STATED ON NEWSNIGHT BREXIT WILL NOT HAVE ANY EFFECT ON THE AMOUNT OF MONEY AVAILABLE TO THE NHS - UNLESS THE GOVERNMENT ALLOWS IT TO FOR PURELY "POLITICAL" REASONS.

EACH YEAR THE GOVERNMENT DECIDES ON THE AMOUNT OF TAX PAYERS MONEY IT WANTS TO SPEND ON EACH "SERVICE" AND IT CAN EASILY DECIDE TO SPEND MORE MONEY ON THE NHS EITHER BY REDUCING THE AMOUNT ALLOCATED TO ANOTHER SERVICE AREA OR BY INCREASING THE AMOUNT OF TAX IT COLLECTS.

THE REALITY IS THAT THE MAJORITY OF TAX PAYERS WOULD BE PREPARED TO PAY MORE IN INCOME TAX IF THEY WERE ASSURED THAT THE EXTRA MONEY WOULD BE SPENT ON THE FRONT LINE OF SERVICE DELIVERY AND NOT ON EMPLOYING EVEN MORE MANAGERS AND INCREASING EVEN MORE THE ALREADY OBSCENE AMOUNTS OF TAX PAYERS MONEY THESE INDEPENDENT NHS FOUNDATION TRUSTS ALREADY PAY THEIR CHIEF EXECUTIVES AND OTHER MANAGERS..

THE UNFORTUNATE REALITY IS THAT SINCE THE HEALTH AND SOCIAL CARE ACT 2012 (WHICH REMOVED THE NHS FROM DEMOCRATIC CONTROL) NEITHER JEREMY HUNT - ONCE THE GOVERNMENT GIVES TAX PAYERS MONEY TO THE 165 OR SO LEGALLY INDEPENDENT TRUSTS THAT NOW RUN ALL NHS HOSPITAL - NOR THE DEPARTMENT OF HEALTH NOR NHS ENGLAND HAS ANY CONTROL ON HOW THAT MONEY IS SPENT.

THE ABOVE IS A NATIONAL DISGRACE

IN ONE HOSPITAL ALONE (IN RURAL NORFOLK) OVER TEN OF THEIR "MANAGERS" ARE PAID SIGNIFICANTLY MORE THAT THE PRIME MINISTER THE CHIEF EXECUTIVE RECEIVING MORE THAT £250,000.

THE POSITION IS FAR FAR WORSE IN LONDON AND OTHER MAJOR CITIES..

JEREMY HUNT ASKED THESE ORGANISATIONS TO EXERCISE RESTRAINT IN THE AMOUNT OF MONEY THEY WERE PAYING THEIR CHIEF EXECUTIVES AND OTHER SENIOR MANAGERS BUT THEY ALL CHOSE TO IGNORE THAT REQUEST AND THERE WAS NOTHING JEREMY HUNT OR NHS ENGLAND COULD DO ABOUT THAT REFUSAL.

KEVIN S. RILEY SOLICITOR (Ret.).

#547996 Clive Smee
professor of Economics and former Chief Economic Adviser at Dept of Health

SINCE THE HEALTH AND SOCIAL CARE ACT 2012 NEITHER HE, THE GOVERNMENT, THE DEPT OF HEALTH NOR NHS ENGLAND HAS ANY POWER TO CONTROL HOW THE NOW LEGALLY INDEPENDENT NHS FOUNDATION TRUSTS BEHAVE.
HE AND THEY CAN ONLY "ADVISE OR RECOMMEND" BUT CAN DO NOTHING IF THE CHIEF EXS OF THESE TRUSTS CHOOSE TO IGNORE THAT ADVICE OR RECOMMENDATION

#547997 Clive Smee
professor of Economics and former Chief Economic Adviser at Dept of Health

At the end of the comment quoted above I meant to add: "Is this strictly true? If so what is the purpose of the Care Quality Commission? And does this explain why one mental health trust continue under the same Chief Executive despite having very large numbers of unexplained deaths?"

#548004 James Bunt
Management Consultant
Gordian Management

G'day. A question. With borrowing rates so low is it possible for the government to borrow sufficient to buy Trusts out of PFIs? This would be a huge relief in income terms and, for FTs, I assume allow them to borrow against assets. Any work been done on this?

Add new comment