Cancer and primary care investment face cuts due to pay bill, NHSE warns

A report to today’s meeting of the NHSE board says the health service is facing “unprecedented” levels of efficiency savings and would not be able to fund a pay rise above the previously agreed level, unless there are cuts to planned elective care and capital spending.

The current funding settlement assumes a pay rise of up to 3 per cent, although media reports suggest the pay review body is set to award NHS agenda for change workers an increase of 4 per cent. This would mean the NHS having to find around £1bn from within its existing financial envelope, unless it received additional funding from government.

The document said integrated care systems had already committed to finding 5 per cent in efficiency savings – more than £5.5bn – in the coming financial year. Despite pressure from NHSE, five of 42 ICSs were unable to submit balanced plans, and instead are forecasting a combined deficit of £100m.

The report, jointly authored by chief financial officer Julian Kelly,  said: “It is therefore not credible to assume any further savings or efficiencies to deal with any new pressures (pay, inflation, new service demands). New pressures will require cuts in planned services or new investments.”

Some senior NHS sources think it is unlikely the government would agree to additional funding, although the current upheavals at the centre of government create major uncertainty around this. The Treasury has previously indicated departments would have to manage the impact of inflation and pay claims from within existing budgets, which were set in October 2021’s spending review.

Speaking to the board, Mr Kelly said it would mean ”having to cut back on investment in our major areas, and our major areas are primary care [and] cancer care”. He also cited “capital investments” such as community diagnostic centres — which are being created to speed up tests for cancer and other disease.

NHSE chief Amanda Pritchard told the board it was important to award staff a fair pay rise, as an ”operational necessity” to retain them in order to deliver services, as well as for fairness, but also to be clear about the consequences for services. 

Mr Kelly’s report also flagged other major risks to the financial plans for the year.

He said the current funding envelopes were based on covid pressures being similar to the summer of 2021, but that there are currently 9,000 covid-positive patients in NHS beds, compared to around 1,000 at the same point last year.

He said: “The SR (spending review) settlement was predicated on low levels on covid equivalent to those seen last summer and being able to reduce ‘covid costs’ by £2.8bn.

“Rising covid levels… are driving higher sickness absence and will increase pressure on temporary staffing costs and infection control arrangements making plans more challenging.”

It was also announced that non-executive director Jeremy Townsend is leading an “efficiency stocktake” review, to see where any further savings have been made, such as via procurement.

Amended at 6.12pm on 7 July to state that cancer and primary care investment face cuts, rather than already established services, having reviewed Julian Kelly’s quote.