You’ve probably seen this slide or variants of this slide in every presentation for the last five years. It’s the funding gap facing the NHS. So that chart is the Department of Health’s budget, it’s total budget adjusted for inflation so it’s in real terms but that black at the bottom is the planned spending before we had the autumn budget last November. The orange line at the bottom is the spending after the autumn budget happened. The two top lines, the blue line and the green line, those are our estimates of what health spending would have to be over the life of this parliament, either to keep pace with the long run average of the NHS which is depending on how you calculate it, 3.74% real terms growth each year or analysis of the OBR’s projections of future healthcare needs, leaving you with a massive funding gap by the end of this parliament.
That’s translated as you are no doubt aware, into mass financial distress. If you look at the 230 odd providers of hospital based, ambulance, community mental health services, the NHS Trusts and Foundation Trusts and just look at them as a sector, the aggregate surplus or deficit two years ago we closed the year with a £2.5 billion deficit. Since then we’ve had some top up funding for the treasury but we’re still operating around this £2.5 billion deficit. We are overtrading as an NHS, as an organisation. And this poses the challenges you would expect but also some unusual ones.
So, this is a quote from a chief exec I know, and what he was saying is you start to lose your calibration of what good looks like and it becomes incredibly hard to g-up your consultants, your nurses every year to say, guess what, we’ve got another 10%, 15% cost improvement plan and even if we achieve it in full which we probably won’t, it won’t be enough and we will still be in deficit. So there is a massive cultural challenge at the moment to keep driving at efficiency and doing things better when you know you will still probably end up in financial deficit.
The response from the centre has been an interesting one, a mix of control, support and exultation to try harder to the front line, try and be a bit more efficient, but over the last two to three years in particular I have seen a massive switch. When new money used to come into the system it used to be pushed out through a national payment system. There was a clear rules base. The money would float to local organisations as quickly as possible. What I’ve seen over the last few years is as your financial risk increases, the centre whether it’s the treasury or the Department of Health or NHS England tries to hold back as much funding as it can for itself and dole it out to organisations with heavy terms and conditions such as signing up to challenging performance targets.
I’ve seen a massive range of responses. I’d say most trusts are trying to do some of what’s in the top left-hand box, focus internally, look at your four walls and try and improve the efficiency with which you deliver your services. There’s another tranche of people who’ve said, we’ll do that but we know it’s not going to be enough. We have to look outwards. Mainly through our region and other networks of hospitals or mental health community providers, probably for me the most interesting ones this top right box; having a theory of change.
And the final two things are slightly cautionary notes when it comes to finances and efficiency in the NHS and driving that out. I see a lot of organisations that have immediately switched to the leadership challenge and the strategic regional issues facing the NHS at the risk of taking your eye off the ball on the bog standard management of day to day business within the organisation, and my final cautionary note is I know we’ve talked a lot about integration, a lot about sustainability and transformation partnerships, integrated care systems, I’m just starting to a sense that whether it’s a delayed transfer or care or inefficiency in the system, all that problem, all that issue is being abstracted up saying, it’s for the system to solve and I’m seeing a lot of this sense of agency.
So in terms of diagnosis and prognosis, yes it can look quite bleak. Prolonged funding squeezes tighter scrutiny, tension between doing everything you can and knowing it’s not enough and to end on a positive note, this increasing focus on systems of care if we really pull it off, will be a game changer. It’ll be an absolute game changer because it will force you to think about populations, patients and system rather than the welfare of your own organisation so I hope it wasn’t too bleak.