The NHS will have to pay the price for cultivating a culture of financial lying and cheating and incentivising the wrong things, warns Andy Cowper

NHS funding has not been fully sorted, as I wrote a fortnight ago, but just how un-sorted it remains was thrown into sharp relief by two publications this past week.

The first is the Commons public accounts committee’s latest report on NHS financial sustainability. And the second is the latest piece from Nuffield Trust senior policy analyst Sally Gainsbury, Having Your Fudge And Eating It.

While Sally’s piece focuses on the details of how the Provider Sustainability Fund has been carried out operationally, and the PAC report takes a more holistic view of system-wide finances, they both remind us of the inconvenient truth that the NHS has been incentivised to do financial things that it should not be doing. I would write ‘And there will be a price to be paid for this’, but what members of the Paying Attention Community such as the readers of this column have realised for some time is that we are already paying that price.

We have been paying it for some time.

Taking the PSF

The fact that the Provider Sustainability Fund has changed its name from the Sustainability And Transformation Fund since its creation in 2016-17 tells us plenty about both the infirmity of NHS funding across this time and the infirmity of system leadership resolve to ensure that the STF (RIP) did what it said it would.

I have written about the proud tradition of lying about the NHS deficit, as in some detail last June. The work of Sally Gainsbury and other colleagues in think-tanks and representative organisations in keeping this issue publicly present has been a vital bit of public service. 

NHS Poseidon

Sally’s explanation of how the fund has incentivised spending cuts in financially above-water NHS providers, incentivised by cash rewards which they couldn’t spend and had to keep on their books to flatter the sector position as to the overspending of under-water NHS providers.

As Sally notes, in 2017-18 this policy saw “90 trusts collectively generating £370m more spending cuts than they strictly needed to break even themselves, for which they were rewarded with £732m from the STF… the resulting £1.1 bn surplus for the year at those 90 trusts had to remain unspent, so to flatter the sector-wide income and expenditure position”.

It is a splendid Catch-22, isn’t it? Sally rightly notes that the proposed removal of foundation trust financial freedom on the issue of capital spending means that FTs’ incentives to make the efficiencies anticipated by the STF/PSF/WTF so as to be able to get to the promised land of capital spending disappear. FTs have had 80 per cent of all the STF/PSF/WTF money.

The situation need not be bleak, she notes: “a one-off increase in the planned capital spending limit of £500m over the next two years might be sufficient to absorb the risk” – the risk being notional likelihood of FTs breaching the Department of Health and Social Care capital departmental expenditure limit.

This does, however, require an intelligent and obvious choice to be made in government. Ahem.

When considered alongside my colleague Lawrence Dunhill’s story from last month about the Treasury Munchkins’ intent to review private finance initiative-type funding for public infrastructure, the picture could be a tad disheartening.

Hurrah, then, for the PAC report to cheer us up… oh.

It warns of “a worrying level of disparity in financial health and patient experience at a local level.  The top-level picture hides warning signs that the NHS’ financial health is getting worse: increasing loans to support trusts in difficulty, raids on capital budgets to cover revenue shortfalls, and the growth in waiting lists and slippage in waiting times do not indicate a sustainable position.

“It is unacceptable to simply offset surpluses and deficits in the presentation of these overall budget results”. Yep, quite.

On the above-mentioned subject of capital spending, the PAC report states “we remain concerned that year-on-year transfers of capital allocations to revenue are having an adverse impact on patient services and care”.

The influence of the evidence given by the Sun King of Skipton House, Simon Stevens, on the lines “the lack of clarity on funding for adult social care, capital, public health and education and training also presents significant risk to the NHS’s ability to deliver the long-term plan” is as unmistakable as it is unambiguous.

Imagine a typical scenario for a provider: you’re being incentivised to do this sort of financial malarkey. You screw it up, and attract attention. Then you are put into financial special measures.

Oops.

This largely involves NHS Engrooveland-Improvement appointing an external management consultant, probably from the ‘Big Four’. Their consultant shows you how to do the trick properly next time.

Mmmmmm.

More broadly, would there be a case to answer that the Healthcare Financial Managers Association and the Chartered Institute for Public Financing and Accountancy have been complicit in overlooking things that while not illegal (which they would be in the private sector), don’t exactly result in the finance and accountancy professions being held in high regard in the NHS?

This may feel like victim-blaming, but it is hard to imagine the medical royal colleges standing for the NHS “encouraging”; their members to play so free with its standards, codes of ethics, etc?

Financial sanity MIA

This stuff matters, hugely. And this is top-level financial sanity missing in action.

And this is before we even get to important points such as Rob Findlay’s righteous put-down to proposals for changing national data publication on elective referral to treatment times to be based on average waiting time targets, from the current 92 per cent within 18 weeks.

The price

In Let’s Get Lost, Bruce Weber’s wonderful 1988 documentary about jazz trumpeter and singer Chet Baker, the long-time heroin addict musician was asked ‘What’s the worst thing about drugs?’

“Oh… the price”, replied Baker.

It’s one of the great lines.

And you know what the worst thing about NHS financial lying and cheating and mis-incentivising is?

Oh… the price. 

The consequences to a culture of financial lying and incentivising the wrong things are not only when these accountancy fiddles reach a wider audience. Which they will, over time.

The consequences are bad decisions in the here and now. It is starting to feel as if the NHS might need a financial truth and reconciliation commission, as well as a chief anthropologist.