NHS in England's payment system 'not fit for purpose', MPs say

The NHS in England has no convincing plan to close a £22 billion "black hole" by 2020-21, according to a damning report by MPs.

A significant number of acute hospital trusts are in "serious and persistent financial distress", there is a "spiralling" trend of increased deficits and the current payment system is "not fit for purpose", the influential Public Accounts Committee said.

The report found that reliance on agency staff, sometimes at "rip off" costs, had contributed to the situation and NHS trusts were also trying to meet unrealistic savings targets.

The NHS is expected to find £22 billion in efficiency savings by 2020-21, but the MPs were not convinced that would be possible.

"There is not yet a convincing plan for closing the £22 billion efficiency gap and avoiding a 'black hole' in NHS finances," the committee warned.

The financial health of NHS trusts and NHS foundation trusts has "significantly worsened in the last three financial years", the MPs said, with acute hospital trusts "at crisis point".

In 2014-15 trusts had a net deficit of £843 million, a severe decline from the £91 million figure recorded in 2013-14 and the £592 million surplus in 2012-13.

Trusts' finances "look set to deteriorate further", with forecasts that the total overspend could amount to £2.5 billion in 2015-16, although capital transfers and accounting adjustments could reduce that to £1.8 billion.

"Not enough has been done soon enough to tackle this spiralling trend", the cross-party committee said.

The targets set by Monitor and NHS England for 4% efficiency savings were "unrealistic and have caused long-term damage to trusts' finances".

The MPs also sharply criticised the NHS and ministers for failures in workforce planning, contributing to a 24% increase in spending on agency staff by acute trusts between 2012-13 and 2014-15.

NHS England told the committee that spending on temporary staff was the largest driver behind trusts' increasing deficits and described how "some agencies providing temporary staff had taken advantage of the situation to charge 'rip-off' fees".

The Department of Health argued that "no one had foreseen the scale of 'exploitation' by agencies".

NHS Improvement suggested that the £4 billion cost of agency staff in 2015-16 could be £880 million lower if there were no "excessive" agency charges.

The MPs said: "We accept that the cost of agency staff may be excessive, but we also note that the use of agency staff in the NHS is nothing new and that the opportunity for agencies to take advantage of staff supply shortages was predictable.

"Yet the Department, NHS England and NHS Improvement are only recently making serious attempts to control agency spending."

The report added: "Ultimately, until the NHS solves its workforce planning issues, including the lack of affordable homes for NHS staff, it will not solve the problem of reliance on agency staff."

The committee's Labour chairwoman Meg Hillier said: "Acute hospital trusts are at crisis point.

"Central government has done too little to support trusts facing financial problems with the result that overall deficits are growing at a truly alarming rate. Crude efficiency targets have made matters worse.

"Without urgent action to put struggling trusts on a firmer financial footing there is further serious risk to services and the public purse.

"In particular it is unacceptable for senior government officials simply to point to excessive agency costs as a source of trusts' difficulties.

"It is the job of those officials to take action to control spending on agency staff, and to address its underlying causes. The use of agencies is a sticking-plaster solution to deep-rooted problems with NHS workforce planning."

She added: "There is a long way to go before the taxpayer will be convinced there is a workable and properly costed plan in place to secure the future of our health service."

Dr Mark Porter, chair of the British Medical Association council, urged George Osborne to use Wednesday's Budget to stop the NHS heading to "financial ruin".

He said: "There is a complete mismatch between the Government's promise of extra funding and the reality on the ground where many NHS trusts are struggling to deliver basic care to patients in a climate of rising patient demand and declining resources.

"The chaos in workforce planning is exacerbating these pressures, with staff shortages in many key specialities resulting in far too much being spent on temporary workers.

"We need the Government to realise that warm words of support for the NHS are not going to halt a rapidly deteriorating situation. Ministers have an opportunity at Wednesday's Budget to begin building a properly funded plan with doctors, patients and other healthcare professionals to help meet the challenges facing the health service. If the Chancellor squanders this chance the NHS will continue to slide further into financial ruin."  

A Department of Health spokesman said: "We know some parts of the NHS are under pressure due to our ageing population, but we disagree with the claim that we are not acting quickly enough.

"We're committed to the NHS and are investing £10 billion so it can implement its own plan for the future - including an extra £4 billion next year to help the NHS respond to the growing demand on services.

"We are intensively supporting challenged trusts to improve finances, while clamping down on rip-off staffing agencies and helping hospitals become more efficient by sharing best practice across the service."

Shadow health secretary Heidi Alexander said: "This damning report should make required reading for George Osborne ahead of his Budget on Wednesday. It reveals the scale of the financial crisis facing the NHS, and lays the blame squarely at the door of Number 10.

"The Tories' failure to adequately fund the NHS, alongside their short-sighted cuts to nurse training places in the last parliament, have put huge pressure on the health service. Staff shortages are forcing hospitals to drain resources hiring expensive agency staff, and the Tories plan to scrap student nurse bursaries only risks making this situation worse.

"The human cost of this failure is patients facing longer waits and poorer care, with hospitals overcrowded and understaffed.

"The report is also clear that the ministers have no idea how they are going to make the £22 billion worth of efficiency savings they are committed to in the NHS over the next four years. It's no wonder they have repeatedly refused to rule out staff cuts and service closures.

"It's time ministers got their heads out of the sand and faced up to the growing crisis facing the NHS."

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