A further £3.6bn of “sustainability funding” will be used to plug NHS provider deficits over the next two financial years, according to NHS planning guidance published today.

The £1.8bn in each of 2017-18 and 2018-19, which mirrors arrangements in 2016-17, will eat into NHS England’s wider “sustainability and transformation fund”, leaving less money for service changes.

Sustainability funding was introduced for the first time in 2016-17, with the additional £1.8bn originally intended to return the trust sector to a breakeven position for the year. But the sector has since planned a deficit of around £2.4bn, meaning it can only be reduced to £580m after using the full sustainability fund.

This means the sustainability funding cannot be released for transformation initiatives as quickly as was envisaged in further years in which total growth in NHS funding is much less than in 2016-17.

Meanwhile, according to the guidance, clinical commissioning groups will have to continue holding a substantial “risk reserve” until 2019, in order to offset the risk of overspending in the provider sector.

This is again an extension of strict arrangements introduced in 2016-17, in which the Treasury effectively has sign-off on 1 per cent of CCG allocations, worth a combined total of £800m.

However, the arrangements will differ slightly for the two years from 2017-18, with a requirement that half of the 1 per cent be held as a risk reserve, with the other half made available but with a requirement to be spend non-recurrently to support transformation.

The guidance says that the 0.5 per cent risk reserve will “complement the introduction of system control totals at a sustainability and transformation plan level” and “release of the risk reserve to each local system will be dependent on delivery of its control total, subject to a satisfactory national risk profile”.

The document also says all CCGs are expected to achieve “at least breakeven position in-year”, while those in deficit will be required to plan for return to a cumulative underspend by 2021. Where this is not possible, they will be required “as a minimum to improve their in-year position by 1 per cent of allocation per year plus any above average allocation growth until the cumulative deficit has been eliminated and the 1 per cent cumulative underspend business rule is achieved”.

Meanwhile, around £270m of commissioning for quality and innovation payments to providers, worth around 0.5 per cent of the local schemes, will also be held in the risk reserve, with payments dependent on agreeing and meeting their financial targets.

The planning guidance also confirms that contract sanctions for key performance standards will continue until April 2019.