• Underspend represents 0.5 per cent of the £117.6bn revenue budget, and follows an overspend of £200m in 2015-16
  • NAO says the DH has overseen “some overall improvement” but is still “some way from achieving financial sustainability”
  • NAO says the system’s ability to invest in infrastructure “continues to be affected by the use of capital budgets to support day to day spending”

The Department of Health has reported an underspend of £563m for 2016-17, but auditors said it was still “some way from achieving financial sustainability”.

The underspend represents around 0.5 per cent of the £117.6bn revenue budget, and follows an overspend of around £200m in 2015-16.

Richmond house

Source: Peter Searle

The Department of Health has ‘a long way to go’ to achieve financial sustainability

The 2015-16 position prompted concerns from the National Audit Office about the lack of planning to secure long term sustainability for the NHS, and the watchdog recognised the DH had overseen “some overall improvement”.

But in an explanatory report attached to the DH accounts, the NAO said: “Unlike in 2015-16, the department itself has not been forced to use the same level of significant one-off accounting adjustments to remain within its budget.

“However, the system at a local level remains under considerable financial pressure and (the provider regulator’s) annual report and accounts note that ‘the NHS still has a long way to go before we can regard it as being on a sustainable footing again’.

“The health system’s ability to invest in infrastructure and maintain its asset base continues to be affected by the use of capital budgets to support day to day spending and this will have implications for the resilience of the service…

“The department is still some way from achieving financial sustainability and many key performance targets have not been achieved.”

As previously revealed by HSJ, the DH transferred £1.2bn of capital funding to prop up the revenue budget in 2016-17, and these transfers are set to continue until 2020.

Meanwhile, performance has been deteriorating against key targets such as the four hour emergency standard and the 18 week standard for elective care.

The underspend within the non-ringfenced part of the DH revenue budget, which excludes depreciation and is seen by some as the key measure of financial performance, was £55 million.

Last year the NHS revenue budget increased in real terms by £3.8bn, which was by far the largest annual increase set in the 2015 spending review. Under these plans the budget is increasing by £1.5bn in 2017-18. Next year the spending review plans suggest an increase of £0.5bn, though the Conservatives’ election manifesto suggested this would increase by an unspecified amount.

The NAO added: “The department has overseen some overall improvement in the financial position of the healthcare system in 2016-17.

“However, this improvement is focused on sustaining the system rather than transformation… The department has more to do to secure the healthcare system’s sustainability, as it acknowledges in the 2016-17 annual report and accounts.”

NHS trusts reported a combined deficit of £791m last year, while clinical commissioning groups overspent against their plans by around £550m. This was offset by the £800m “contingency fund” that was held back from CCGs, as well as underspends in other NHS England budgets.

The capital budget was underspent by £60m.