• NHSE outlines new financial oversight framework
  • Three quarters of systems have submitted deficit plans
  • Julian Kelly says there is “real risk” just two months into year

Around three quarters of England’s 42 integrated care systems have been unable to set balanced budgets for 2024-25, NHS England has revealed.

Chief financial officer Julian Kelly’s paper to NHSE’s July board meeting, held yesterday, said 31 ICSs were planning deficits for this financial year. 

Mr Kelly said there was “no room to cover any further pressures” after NHSE had provided funding to cover the gap in local budgets, which adds up to £2.2bn. It comes with ministers deciding imminently on pay uplifts for 2024-25 and how they will be funded. 

The CFO told the meeting systems had already fallen behind their financial plans in the first two months of the year and stressed the funding settlement, close to flat in real terms, was “really tight”.

And in a related development, HSJ has learned that NHSE wrote to another 11 ICSs this week, warning it has “significant concern” about their finances, further underlining the system’s financial fragility.

The move follows nine ICSs with the highest risk of overspending being ordered to bring in consultants for a rapid review of efficiency plan earlier this month.

Mr Kelly told the board: “At the end of month two [May], total system spend is about £300m off plan… that clearly flags a real risk as we sit here today. Our clear focus with ICBs and with providers is how we get back on to plan and how boards… deliver the financial and operational plans to which they have committed.”

He said costs in areas such as prescribing and NHS-funded care packages were increasing faster than allocations.

As part of system leaders’ efforts to grip the financial slide, NHSE has ranked systems from one to four, with the nine in the highest rating directed to undergo a “rapid intervention process” under a new ratings system (see below: How new finance ratings are decided).

Eleven ICSs in the next tier down, where NHSE believes there is “significant concern”, are receiving letters this week setting out next steps.

The systems in this tier are:

  • Bath and North East Somerset, Swindon and Wiltshire
  • Buckinghamshire, Oxfordshire and Berkshire West
  • Coventry and Warwickshire
  • Devon
  • Dorset
  • Hertfordshire and West Essex
  • Humber and North Yorkshire
  • Northamptonshire
  • South West London
  • Staffordshire and Stoke on Trent
  • Sussex

A copy of a letter from Mr Kelly sent to one system, seen by HSJ, states: “Given the financial situation facing the NHS we need all 42 ICSs to deliver on their submitted financial plans… To be completely clear, there’s no room for any overspends for any system this year.

“To help ensure success, we are asking systems deemed to have significant risk to meeting their financial plans to take immediate action.”

The letter asks these systems to provide a bridge showing how they will improve the rate of spending so they can return to their submitted plans in the remaining months of the year. This will be reviewed before further interventions are considered, it adds.

This year’s planning round was extended to mid-June after earlier iterations of the plans were deemed unaffordable.

Financial rules were overhauled in late May to introduce harsher penalties for organisations that did not set balanced budgets.

Mr Kelly also told yesterday’s board meeting that spending on agency staff fell to £3bn in 2023-24, an improvement of £500m on the previous year. He said providers were on course to bring this down to less than £2.5bn.

How new finance ratings are decided

NHSE says it bases its decisions on monthly reviews of each system’s run rates, how far they are from their financial plans, workforce data and other relevant information.

Each system is categorised into one of four levels, with one meaning there is high confidence that an ICS will deliver its financial plan. Tier three means there is “significant concern”, with a further sub-category of “3+”, where they might deterioriate further.

Tier four is for areas of “greatest concern” and brings a mandatory rapid intervention process.

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