This needless battle over NHS finances endangers its future

In his latest expert briefing, HSJ finance correspondent Crispin Dowler notes 2016 was supposed to see “the whole of the NHS” acting with “a collective will to drag the provider sector out of deficit”.

But, as the briefing explains, that consensus is proving paper thin. The contracting round is proving a bruising experience, with NHS Improvement and NHS England at odds over CQUIN payments and countless local conflagrations flaring up throughout the country.

The “strategic transformation fund” designed to deal with the deficit is, in the eyes of CCGs, a “get out of jail free card” and to providers a barely adequate recognition of their financial plight.

These tensions are stoked by a little expressed but strongly held belief within the commissioning sector that providers have not managed their costs effectively; and a determination shared by all not to be blamed if the NHS fails to deliver on its promise to the Treasury to return to the black.

A subtextual analysis of the report by Simon Stevens to the NHS England board is illuminating in this regard. The paper makes a series of points: growth in emergency hospitals admissions is “relatively constrained”; while elective day cases are up, inpatient activity is down; and inpatient bed days are “flat to negative” year on year. In other words: don’t believe the hype about surging hospital demand.

The paper then goes on to praise clinical commissioning groups and NHS England for their financial management.

Knee-jerk reaction

In contrast, during his interview with HSJ late last month, health secretary Jeremy Hunt repeated what has become a mantra among leading policymakers: the provider sector has made its financial situation worse because it employed too many nurses in a knee-jerk reaction to the Mid Staffs report.

‘The answer is not to plead for more money. The NHS needs, instead, a more credible trajectory for returning to the black’

The “Francis effect” is encapsulated in a set of influential but unpublished figures doing the rounds in Whitehall. These show trust income growth in 2013-14 was 3 per cent, compared to a 4 per cent increase in costs. In 2014-15 the figures were apparently 3.3 and 4.3 per cent, while the projection for 2015-16 is that income has risen by 2 per cent against cost growth of 4.6 per cent.

This sense of a provider sector unable to efficiently match demand and supply was behind the message issued last summer that a deficit greater than the £1bn recorded in 2014-15 would be “unacceptable”. That ambition was almost immediately crushed by the momentum already then present within NHS finances and the latest prediction is for a deficit between £2.2bn and £2.8bn.

Lack of grip

This variance is blamed by some influential figures on the lack of grip exercised as Monitor and the Trust Development Authority handed over to NHS Improvement. Those who enquired were told “things will be different once Jim is charge and overdue control totals are in place”. But Mr Mackey and his new team have proved to be a reluctant hammer of the gods, remaining sceptical there are huge savings to be made by providers.

Many in the provider sector also specifically reject the “you’ve hired too many nurses” line, pointing out that Monitor figures suggest nursing supply is only just keeping pace with demand and then only because of heroic efforts on length of stay.

Neither side in this dispute have the winning argument. They are forced into this conflict because of the Treasury deal. The answer is not to plead for more money – that is the wrong question to ask. The NHS needs, instead, a more credible trajectory for returning to the black.

The great – and enduring – achievement of the Five Year Forward View was to achieve consensus on the future direction of the service; the service now needs a corresponding consensus on what parts of that vision can be delivered – and at what pace – within the funding available. That should be the defining contribution of those leading the NHS in 2016.