What NHS England isn’t telling you, and more indispensable insight for commissioners, by Dave West.

An update from the funding U-bend

We’re now four and a bit months into the second year of the 2015 spending review plan: meaning the NHS is plunging down the first straight of its U-bend funding settlement. Growth in clinical commissioning group allocations goes off a cliff this year – for some, negative per capita – as do specialised budgets.

The extremely precarious situation this year is not yet showing in official forecasts – people are keeping numbers close to their chests – but experienced finance heads say there is every reason to be nervous.

Signals include a growing clamour about access restrictions; NHS England turning to an “urgent” plan B for the national 2017-18 risk pool; even more unachievable efficiency targets; and greater hesitancy about dishing out transformation funds.

Of course, in the spring – before the general election was called – there was the remarkable official announcement that elective waiting times targets would not be met for the foreseeable future.

The waiting list and the row about it will probably keep growing, with the opposition likely applying more pressure and the government getting nervier.

For Simon Stevens and colleagues, the bottom of the U-bend (ie: next year) was never meant to be a reality – they assumed there would be a significant revenue boost as part of a 70th birthday present for the NHS from David Cameron and George Osborne.

Political upheaval combined with the fiscal situation mean that is very far from a done deal and while the finances this year could be desperate, next year they could be beyond the pale.

It means the NHS must have to ensure that as well as the anticipated capital funding, revenue is a very live issue at the autumn budget (even more so if there is to be a loosening of pay restraint).

NHS Improvement drift

The state of NHS Improvement will be a big factor in the financial outlook and other matters, and the relationship between NHS England and NHSI has never felt more important – or looked more stretched. There is no permanent chair at NHSI and the possibility of appointing a big name who might not help things; Jim Mackey is departing in two months; and the chief exec recruitment process has an air of desperation.

NHSI may be drifting in the meantime, with Getting It Right First Time lead Tim Briggs telling national media that the NHS should not get any more money (cf. point about the autumn budget).

Certainly, the relationship between NHSI and NHS England feels as strained as ever. In one obvious case, the latter pointedly rebuffed GIRFT’s dig at commissioners for limiting access to bariatric surgery (which they’ve ended up doing precisely because the NHS hasn’t got enough money, of course).

More materially damaging are the conflicting pulls on local health systems from NHSs E and I – ever more important as the efficiency air gets thinner and service changes and savings schemes bite harder.

A lot has been said about their joint work in the South but it looks like the difficult issues of this are yet to be thrashed out, and could be impossible with no NHSI chief exec in place.

STF and the financial regime

The sustainability and transformation fund remains a central feature of the NHS financial story from 2016 along with its smaller sibling, the system risk reserve.

Anyone out there still harbouring a belief in transformation, hope for rapid change in care delivery or taking “accountable care systems” seriously has reason to be pretty fed up of the STF regime.

It has played a big part, for example, in acute care spending growth running ahead of GP spend in 2016-17, despite some officials busting a gut trying to drive investment in general practice.

The richest rewards under the £1.8bn sustainability element of the fund are for hitting financial targets by whatever means, rather than for working to improve a population’s health or services, or even to make them more affordable in future.

Conversely, if a trust fails to hit its targets – potentially while still doing the right thing by its system – the whole patch and its residents miss out on the resources.

Theoretically, the transformation part of the fund is worth £1bn in 2017-18 and similar next year, making the total STF up to more than £2.8bn. It’s unclear how much is actually being released and what does arrive is often piecemeal and tightly linked to specific programmes. Local planning, whether by organisation or system, is difficult while significant income is non-recurrent and dished out at a national level on the fly.

In June, Mr Mackey said the health service should start to think about how to get itself off the STF – and what comes after it.

Those investing time in Sustainability and Transformation Partnerships/health systems/ACSs – which still don’t have formal powers – would be much helped if they were given oversight of some of these funds, to give them a means of getting stuff done.

The STF is deeply entangled with the control total regime and financial grip running vertically, separately, through NHS England and NHS Improvement. Probably the number one task for the joint working of these two is to rewire this to remove the provider/commissioner conflict from financial control.

The final arbiter of any proposed replacement regime will probably be the Treasury, which, after all, mandated the current arrangements and would want to see something that gives at least as much guarantee of staying within spending limits.

Similarly, escaping the STF and control totals will be tied to the state of accounts nationally this year and next, as well as contingent on any decision to put in substantial new funding – both of which are highly uncertain.