- £85m overspend comes despite the department already being given significant extra headroom earlier in the year
- Overspend breaches Treasury control total, but not the spending limit set by parliament
- NHS in deficit overall
- Continues the trend of underspends against depreciation budgets
The Department of Health and Social Care breached a key Treasury-approved spending limit in 2017-18, according to figures within its annual accounts.
The £85m overspend in the non-ringfenced element of the day-to-day spending budget comes despite the department already being given significant extra headroom earlier in the year.
A controversial raid on capital budgets had boosted the revenue account by £1bn, while the department also received £335m of additional revenue half way through the year.
The overspend does not breach any spending limits set by parliament, so does not require a formal process to ask MPs to approve a budget increase.
It is not referred to directly within the DHSC’s annual report and accounts. Instead, the report highlights the £692m underspend within the overall resource departmental expenditure limit, on a budget of £120bn.
But a footnote within the accounts says this figure includes the benefit of a £777m underspend against ringfenced “depreciation” budgets, which cannot be used in calculating the key Treasury indicator.
It says: “The total Revenue DEL underspend of £692 million consist(s) of a £777 million underspend against the ringfence control. This is not cash-backed, and cannot be used to fund healthcare services.” This implies an £85m overspend on the non-ringfenced RDEL, which will have required separate approval by HMT.
The report says NHS providers were overspent by £991, which was £31m worse than the figure reported by NHS Improvement. NHS England delivered a £970 underspend, which meant the NHS overall was around £20m in deficit.
Saffron Cordery, deputy chief executive of NHS Providers, said: “The DHSC accounts show that the financial situation facing the NHS in 2017-18 was fundamentally unsustainable. The extra money announced by the government for 2019-20 and beyond is therefore welcome, but we should be under no illusions about the scale of the task facing providers during 2018-19, before the new funding kicks in.”
Meanwhile, the head of internal audit at the DHSC gave “moderate assurance” in relation to the reporting year, which means that “some improvements are required to enhance the adequacy and effectiveness of the framework of risk management, governance and control”.
This matched the judgement given in 2016-17, when there was a downgrade from the “reasonable” level of assurance given in 2015-16.
The underspend on depreciation matches a trend which has been highlighted recently by HSJ, as the DHSC has struggled to keep within its spending limits.
Depreciation is a standard accounting mechanism intended to cover the costs of assets over their lifetime. It does not involve a cash transaction but effectively helps organisations generate cash surpluses to replace assets when they expire.
Several accountants working in the NHS have raised concerns that depreciation charges are being pushed too low and this could lead to cash shortfalls in the future.
The DHSC said all required funding approvals were provided, and RDEL expenditure was contained within the parliamentary limit.