Following the Money: NHS England struggles to hold the line

NHS England’s efforts to chivvy integrated care systems into line on their financial plans appear to be coming up short.

Local sources say the latest round of plans have shown some initial improvements, but nothing on the scale needed to get to breakeven.

Instead, the latest submissions are thought to suggest a deficit of between £4.5bn and £5bn nationally, down from the gap of just under £6bn reported at the end of February.

The rate of improvement looks significantly slower than last year, when an initial £6bn forecast was cut in half by the next round of plans, before falling to £700m in final plans.

While the number will inevitably come down further, local sources told Following the Money it would be much harder to squeeze out the same gains this year.

Several said they faced a seemingly unsolvable problem, in which they are already planning to freeze or cut staff numbers, or have committed to high levels of efficiencies, but still faced significant deficits.

The only alternative would be deeper cuts to staffing – which would be disastrous for patient safety, they warned.

One trust chief said the centre would struggle with “systems that have massive efficiency plans, have not obviously got a load of planned cost growth, but can’t make the numbers add up”.

The challenge stems from the heavy use of one-off measures and income to prop up the financial position in 2023-24, leaving the cupboard diminished for 2024-25. One ICS finance boss said getting through this year had “required the balance sheet to be emptied… [now] everything has gone”.

There is also, perhaps, less willingness to sign up to high-risk breakeven plans (often based on unrealistic nationally set assumptions). Some systems (Greater Manchester being the most prominent example), put in balanced plans in a bid to try and do the right thing, before embarrassingly revising their forecasts in-year.

Another local source said: “We’re not going to do what we did last year, coming up with false assumptions of lower inflation. We’re going to do it properly and build it based on fact and that means we can’t get there [to breakeven].”

Deficit of trust

One feature of the planning round is the lack of trust on all sides.

Starting from the top, ministers have a deep-seated suspicion of the NHS’s ability to handle its money, which isn’t helped by setting stretching operational asks and not funding them properly.

In turn, local sources say the national team is suspicious of their numbers, believing them exaggerated.

At a local level, ICSs are trying to plan without access to full information, not least the planning guidance. But they are also trying to sense where other areas are, and, crucially, how final the allocations really are.

Recent years have seen a series of budget top-ups during the financial year. This was despite Julian Kelly insisting at the start of this year that there was no funding at the centre to cover local deficits.

It’s impossible to tell whether this was a negotiating ploy, or whether there is technically no risk reserve because it is labelled as the tech fund. But last-minute cash payments of £650m, for systems in the red, undoubtedly muddied the waters.

The official line is still that ICSs must reach breakeven, but in practice it’s difficult to see how many of the areas with the largest overspends can return to balance in just a year.

Some local sources report that NHSE is trying to hold the line at the final 2023-24 deficits, telling systems anything worse in 2024-25 will not be accepted.

The job of managing many of those negotiations will now be carried out by Nik Khashu, the North West regional director of finance, who is stepping in as Julian Kelly’s operational finance deputy after Peter Ridley took a job at Portsmouth University Hospitals.

Health inequalities

A new report has shed light on the use of dedicated health inequalities funding to balance the books.

Speaking in private, finance chiefs said they often have little choice but to do this, and that NHSE has turned a blind eye to the practice.

The Confed report looked at a sample of 20 ICBs and how they used a ringfenced pot of £200m allocated in 2022-23.

Just half used the full amount on inequalities, the report found. Another seven used some but not all of the funding, while the remaining three transferred all of it into baseline spending.

The report only covers how the ringfenced allocation was used, meaning some of those could have committed other funds outside the £200m.

But it states: “There were some cases where the health inequalities lead had not been involved in the decision to use the funding to address deficits elsewhere in the system – usually acute or elective hospital care.”