'Pie in the sky assumptions' about closing NHS funding gap

Updated: 

Health officials are making "pie in the sky assumptions" about closing the NHS funding gap, an influential MP has warned.

Meg Hillier, chairwoman of the Public Accounts Committee, called on the Prime Minister to address "realities of increasing deficits in NHS trusts".

The comments come as a new report from the National Audit Office (NAO) concluded that financial problems in the NHS are "endemic".

The report, which delves into the last financial year of the NHS in England, highlights that NHS trusts deficit grew by 185% in 2015/16.

Provider trusts' overall deficit was £2.45 billion, up from £859 million in 2014/15.

This means that the NHS overall entered the current financial year with a "worse than expected starting point", which could hamper plans to close the estimated £22 billion gap between patients' needs and resources by 2020/21, the NAO said.

To close this gap, the Department of Health, NHS England and NHS Improvement estimate that they can make £6.7 billion of efficiency savings through a number of measures including capping public sector pay and renegotiating contracts, the NAO reported.

The bodies estimate that trusts and commissioners can make a further £14.9 billion of savings by "moderating the growth in demand for healthcare services" and making 2% productivity and efficiency improvements.

But the NAO warned that plans to close the gap have not been fully tested.

The report states: "We found limited testing by the Department, NHS England and NHS Improvement of their estimates of how much they expect to generate from their savings programmes.

"This raises concerns about whether planned savings can be achieved."

Amyas Morse, head of the National Audit Office, said: "With more than two-thirds of trusts in deficit in 2015-16 and an increasing number of clinical commissioning groups unable to keep their spending within budget, we repeat our view that financial problems are endemic and this is not sustainable."

Commenting on the report, Ms Hillier said: "Today's report from the National Audit Office reiterates serious problems with the financial health of the NHS.

"The Department of Health, NHS England and NHS Improvement are making pie in the sky assumptions to maintain they can still close the forecast gap in funding by 2020-21, when trusts' deficits increased by 185% in 2015-16 to £2.45 billion.

"This year, they already had deficits of £461 million three months in, despite getting £450 million of sustainability funding.

"Again, I call on the Prime Minister to address the realities of increasing deficits in NHS trusts, long-term workforce problems, unrealistic efficiency targets and the impact these financial stresses are having on the quality of services."

However, a report released last week on the first two quarters of 2016/17 showed that NHS trusts are making progress towards financial recovery.

The NHS deficit is now £648 million, which is £968 million better than at the same point last year, according to figures from NHS Improvement.

A Department of Health spokesman said: "We know finances are challenging for some parts of the NHS, which is why we have a strong plan to get back on track.

"We are already seeing progress, with 40 fewer trusts in deficit compared to this time last year.

"We are also investing an extra £4 billion in the NHS this year to transform services and improve standards of care, which will rise to an extra £10 billion per year by 2020/21."

Commenting on the report, Professor Jane Dacre - president of the Royal College of Physicians, added: "We agree with the NAO that the situation is having an impact on patient care - not only is the NHS struggling to balance today's books, but it is unable to invest in new plans for joined-up services that are needed to transform and improve care in future by bringing it closer to the patient, and save money in the long term.

"We need an NHS budget that meets the demand for health services now and in the future."

Jonathan Ashworth, Labour's shadow health secretary, said: "This report from the independent National Audit Office is absolutely damning.

"They are very clear that it is this Government's 'aggressive efficiency targets' which have contributed to the disastrous deficits in the NHS and that the current financial trends are just not sustainable.

"They are also clear that the financial pressure is affecting access to services and the quality of care patients are receiving.

"The Government cannot turn away from the situation any longer: the NHS is in a financial crisis, the crisis is of their own making and it's patients that are suffering as a result.

"This cannot go on - the Government must act."

Richard Murray, director of policy at The King's Fund, said: "The Government will need to look again at NHS funding in future financial statements. In particular, the pressures will peak in 2018/19 and 2019/20, when there is almost no planned growth in real-terms NHS funding."

A spokeswoman for NHS England said: "This NAO report is largely a commentary on last year compared to the year before. The good news is that for this year, hospitals are on track to cut their deficit by more than two thirds.

"What's more, latest figures published last week show that NHS trusts have continued their recovery and with NHS England are on course to balance their combined budget for 2016/17."