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Quarterly monitoring report (QMR) 29

How is the NHS performing?


Since April 2011, The King’s Fund has published a quarterly monitoring report (QMR) to track the financial and performance issues facing the NHS. This report is based on an analysis of national data and a regular survey of NHS trust and commissioner finance directors.

This is the 29th edition of the QMR and the first since July 2019. To avoid adding to the pressures on NHS finances leads during the Covid-19 (coronavirus) pandemic, and reflecting broader changes to how the QMR will operate in future, there is no survey in this QMR.


The question each QMR tries to answer is ‘How is the NHS performing?’.

In many ways, this is the worst time to try and answer that question because the Covid-19 pandemic has dramatically altered how NHS services and finances operate. This is a deeply irregular moment for our regular assessment of how the NHS is faring.

But at the same time, there have been several substantial changes in the world of NHS finance and performance in recent months that are worth analysing, particularly at this time of year when the national bodies and government departments usually publish their accounts. And as the recent write-off of £13.4 billion of NHS loans demonstrates – long-term policy changes can still happen even during a pandemic.

So, in this QMR we look at three areas of the NHS: revenue (day-to-day spending), capital (longer-term investment, in buildings and equipment for example), and waiting time performance. And for each, we will look at where the NHS expected to be at the end of 2019/20, where it actually finds itself in 2020/21, and what impact Covid-19 may have in the future.

Revenue (day-to-day spending)

The plan for 2019/20

2019/20 was always going to be a significant financial year for the NHS. It was the first year of the new five-year funding deal and the first year of a planned ‘reset’ of how NHS finances work. The hope was this reset would help address the persistent financial deficits in parts of the NHS (see Figure 1).

A bar grah showing that The NHS provider sector has remained in deficit since 2013/14

The first part of this reset aimed to set a more realistic and achievable financial task for NHS organisations. The boost from the new five-year funding deal (and a final year of planned transfers from capital to revenue funding) meant annual financial targets (or ‘control totals’) for NHS organisations could be set at a more achievable level. Prices paid for NHS services covered by the national payment system (the national tariff) increased for the first time in recent years (see Figure 2) to give providers – or at least those still using the national tariff – a better chance of covering their costs.

A bar graph showing Prices under the NHS national tariff have only recently started to increase

The second part of the reset aimed to wean NHS organisations off the centrally administered funding pots that have supported NHS finances since 2016/17. The central funding pots that will remain in future years – such as the Financial Recovery Fund – will be smaller and more targeted at organisations with the most challenged finances (see Figure 3).

A bar graph showing Central funding pots are planned to reduce in future years

The expectations of what these changes to NHS funding and finance would achieve in this parliament were clearly set out in the NHS long-term plan.

  • First, the NHS would continue to balance its books at the national level.

  • Second, the aggregate provider deficit would be reduced each year, with the sector financially balancing in 2020/21.

  • Third, the number of trusts and clinical commissioning groups (CCGs) individually in deficit would reduce each year – with the number of trusts in deficit reducing by a half in 2019/20 compared to 2018/19, and each NHS trust and CCG achieving financial balance by 2023/24.

The 2019/20 picture

So, after all that planning, where did the NHS find itself financially at the end of 2019/20?

At time of writing in mid-2020/21, the final 2019/20 financial position is not in the public domain, with the most recent details for the financial year available only until the end of January 2020. But from NHS England and NHS Improvement’s oral evidence at a late May Public Accounts Committee, the NHS was on track to break even in 2019/20 (before the exceptional Covid-19 expenditure at the end of the financial year), and that the proportion of trusts in deficit was likely to halve.

But that good news is tempered by some familiar trends in NHS financial performance. While the NHS overall may have balanced its books in 2019/20, financial reports for the first 10 months of 2019/20 suggest this was again due to budgets held by national bodies (in the form of underspends rather than planned reserves) that offset the higher-than-planned deficits in CCGs and provider trusts (see Figure 4).

A bar graph showing  Financial balance in the NHS will require substantial underspends in central commissioning budgets

Turning to 2020/21

Key changes planned for 2020/21

The NHS national planning guidance set out several changes to how NHS finances would operate in 2020/21. These included the following.

  • Strengthening the emphasis on systems – rather than organisations – by adopting ‘system by default’ policies and preparing local health economies to become integrated care systems by April 2021.

  • Asking CCGs and NHS trusts to deliver against the financial improvement trajectories national bodies issued in October 2019. These set out the planned level of financial performance between 2020/21 and 2023/24.

  • Tying 50 per cent of the Financial Recovery Fund to system financial performance and not just to individual organisation performance. The fund was established in 2019/20 as a centrally administered fund to support NHS trusts in deficit who had agreed annual financial targets (control totals) with the national bodies.

  • Offering a one-year transitional reward payment of 0.5 per cent of income for NHS trusts that delivered a break-even or surplus control total in 2019/20 and 2020/21.

  • Capital and estates plans at system level – rather than organisation level – would become the main basis for capital planning.

The original plans for NHS finances in 2020/21 have understandably become moot. But it is still worth briefly reviewing what those initial plans for 2020/21 suggested about the medium-term future of NHS finances.

First, the move towards ‘system by default’ planning was expected to accelerate. Most obviously, this would come from half of the Financial Recovery Fund being tied to the financial performance of local systems (ie, sustainability and transformation partnerships and integrated care systems) and not just to individual organisation performance (this commitment was reiterated at the most recent July 2020 NHS England and Improvement board meeting – with a plan to put ‘greater focus on system partnership funding’ from October 2020, as the NHS continues its recovery from Covid-19).

Second, new funding would be provided to deliver the government’s manifesto commitments. The March 2020 Budget provided an extra £5.4 billion of (non-Covid-19-related) revenue funding during this parliament, over and above the funding settlement already agreed, for more clinical staff and GP surgery appointments.

And finally, there were some existing priorities that still needed to be delivered in 2020/21 – not least for the provider sector to financially balance for the first time since 2012/13.

As discussed later, this plan – like so many others – must surely have changed because of Covid-19. While we still do not know the final financial position for 2019/20, the early indications for 2020/21 (based on the first two months of the financial year) highlight the considerable costs of responding to Covid-19 - as the NHS reported a year-to-date overspend of £2.6 billion.

Capital investment

2019/20 was an odd year for capital investment in the NHS. It initially looked like a year of underinvestment, with £441 million transferred out of capital budgets to support day-to-day revenue spending and national bodies requesting 20 per cent cuts to local capital spending plans.

But then plans changed things substantially. The Autumn 2019 Spending Round saw a £1.1 billion increase to capital spending limits in 2019/20. This was swiftly followed by a health infrastructure plan that set out a new multi-year plan to invest in buildings, equipment and technology, and to deliver on the government’s commitment to build or redevelop 40 new hospitals. Because of these changes, based on the latest forecast, capital spending by NHS trusts in 2019/20 rose to its highest level in recent years.

And 2020/21 was meant to continue this reversal of past underinvestment, by breaking ground on new hospitals and other facilities. The Autumn 2019 Spending Round would see the Department of Health and Social Care capital budget rise to £8.2 billion in cash terms.

But, once again, plans changed. In June 2020 the government announced a further £1.5 billion of capital funding to improve the condition of NHS buildings, boost accident and emergency (A&E) capacity, build new hospitals and replace outdated mental health dormitories. This could take capital investment in 2020/21 as high as £9.7 billion in cash terms (see Figure 5).

The iterative increases to NHS capital spending over the past year are welcome but health services are still waiting for the multi-year strategic capital plan that has been promised for some years. As in previous years, all eyes interested in NHS capital funding will again turn to the Autumn Budget and Spending Review.

A bar chart showing NHS capital budgets are increasing again

Aside from the amount of capital funding on offer, one further but more subtle change was planned for 2020/21 – systems (ie, sustainability and transformation partnerships or integrated care systems) would be given a more prominent role in NHS capital investment decisions.

While individual provider organisations would remain responsible for maintaining their estate and delivering their own plans, each system would be given a capital spending limit and responsibility for making sure each organisation stuck to its plan, so the total system budget was not breached.

To ensure this was not a case of ‘responsibility without power’ for system leaders, they would hold some soft power in deciding which bids for emergency capital investment would be prioritised across the system. The 2020/21 capital planning guidance also notes systems will increasingly have a say in how the proceeds from organisations selling surplus land and assets are used for the benefit of the wider system. That may be going with the grain of a new ‘system by default’ ethos, but would be a substantial change to the long history of organisation-based capital planning and learned behaviours.

And finally, in keeping with the ‘system by default’ theme of the 2020/21 planning guidance, national bodies said that systems would have a (carefully managed) opportunity to move capital investment between NHS trust budgets and commissioner budgets for primary care business-as-usual capital investment. Another small but subtle sign of the old organisational walls breaking down.

Performance against key standards

It is a statement of the obvious to say that NHS activity levels and waiting time performance in 2019/20 and 2020/21 will have dramatically changed as a result of Covid-19. But it is worth briefly reminding ourselves of the performance levels originally expected as the service looked back on 2019/20 and ahead to 2020/21.

On A&E waiting times, the 2018/19 planning guidance said that over the course of 2019 the NHS would return to meeting the standard of 95 per cent of patients being admitted, discharged or transferred within four hours of arrival. This was not achieved, with 2019/20 instead seeing the worst performance against the target on record (see Figure 6).

The plan for 2020/21 was for providers to improve their A&E performance compared to 2019/20 levels. In large part this would be achieved by ensuring that no more than 92 per cent of general and acute hospital beds were occupied, which would reduce the delay in admitting patients from A&E departments because of a lack of available beds.

Multiple bar charts showing A&E performance was more challenged in 2019/20 than previous years

On the 18-week referral-to-treatment target for planned (elective) consultant-led care, the national bodies set the expectation that individual providers would improve their waiting list position during 2019/20 and that the overall waiting list for planned care would decrease as a result. Instead the waiting list grew to nearly 4.5 million people by the end of 2019/20. And while the number of patients waiting more than a year for planned care was reduced compared to a recent high in summer 2018, these extremely long waits were not ‘eradicated’ as planned.

The plan for 2020/21 was for providers to deliver lower waiting lists in January 2021 compared to January 2020 and continue attempts to end long waits of more than 52 weeks for planned care.

In the background of these familiar targets from recent years, there was the Powis Review of Clinical Access Standards led by NHS England and NHS Improvement’s Medical Director. The review was expected to report by the end of March and set out a new way of measuring performance for A&E departments in particular. This report, as with so much else, has been delayed due to Covid-19.

Covid-19 (coronavirus)

So far, we have talked about the original plans and current state of play with NHS finances and performance. But, of course, the shadow of Covid-19 looms over all the areas covered – though its shadow does not fall evenly.

Many of the key changes to the original plans for 2020/21 were communicated early in a 17 March 2020 letter from the leaders of NHS England and NHS Improvement.

One set of changes aimed to reduce routine burdens on the NHS. At least initially, all NHS trusts were moved off the national tariff payment policy and put on block contract payments ‘on account’ – essentially guaranteeing a minimum level of income for providers. Contract fines were suspended for all providers. And because of these changes, some of the time that is usually spent on filling in and submitting planning templates and sending invoices flying around between commissioners and providers could instead be used for dealing with the pandemic.

And any new draws on NHS management capacity were pushed into the future where possible. CCG mergers that were not already advanced by April 2020 were paused. The Powis review of waiting time standards was be delayed to later in the year. And the operational planning process for 2020/21 was suspended.

A second set of changes aimed to ensure financial constraints did not stand in the way of the NHS responding to Covid-19. Following on from the Chancellor’s commitment to give the NHS ‘what it needs’, the Secretary of State for Health and Social Care gave the NHS permission to overspend the 2019/20 budget Parliament had approved. And a staggering £35 billion of extra spending was allocated to help health services respond to Covid-19. The £15 billion bill for personal protective equipment (PPE) for staff alone outstrips annual spending the education and training of the workforce and the public health grant many times over.

Finally, a third set of operational changes increased the NHS’ capacity to deal with the initial surge in cases from Covid-19. This included rapidly discharging hospital patients who were medically fit to leave, postponing non-urgent operations and block-buying capacity in independent hospitals.

These actions – and wider changes to the public’s use of health care services during lockdown – had a stark effect on activity in the NHS, which reached record lows in recent months (see Figure 7).

Multiple bar charts showing Many NHS services have seen sharp drops in activity during Covid-19

An obvious consequence of these changes is patients having to wait longer for non-urgent care (see Figure 8). In circumstances like these, the size of the ‘waiting list’ for care now becomes even more of a red herring in assessing the NHS’s performance, as what matters now is how quickly patients are put on the waiting list (which is heavily affected by access to GP services) and how quickly they are taken off the list as a result of receiving the care and treatment they need.

A bar chart showing The number of people waiting over a year for planned care has rapidly increased

Despite innovations in the use of digital technology to deliver everything from primary care consultations to capsule endoscopy, and the continued capacity provided by the private sector and repurposed Nightingale hospitals, warnings from the Royal Colleges suggest it will be years rather than months before the growing backlog of care can be reduced.


The 28 previous editions of the QMR have seen general elections, flu outbreaks and Spending Reviews. They have never seen anything like Covid-19. So only a fool would predict what impact the virus will have on NHS finances and performance in the medium term. But if one thing is clear, it’s that the manifesto commitments of a new government and the existing NHS long-term plan will have to be recalibrated against the new reality Covid-19 has imposed.

And expectations will also have to be calibrated against the reality that existed before Covid-19. Despite the best efforts of staff, 2019/20 saw truly dismal performance against national targets for A&E and planned elective care. And while there were some green shoots on the overall NHS finances, this masked some substantial deficits in both NHS providers and CCGs.

So, one plea to national policy-makers at this time might be to let go of the past (or at least, some of the past).

When the NHS misses a national target or plan there are often three different reactions: the target is either redefined, reiterated or kicked further down the road. There is a danger that this pattern is repeated again and existing financial and performance targets are simply reinstated once the immediate threat of Covid-19 recedes.

But on the other side of this pandemic the NHS will have very different macroeconomic conditions, an exhausted workforce and a public that – perhaps more than ever – values health and care services.

Rather than acting quickly to state that ‘provider financial deficits will be eradicated in 2021/22 rather than 2020/21’, NHS leaders and government should be allowed time to think and decide which of the financial and performance rules and expectations that existed before Covid-19 should be dropped, and which can realistically be carried into the future.