• Strongest NHS trusts will be released from control totals and offered new reward payments
  • Deficit trusts given financial “improvement trajectories” over four years
  • Organisations to be held “more robustly to account” for meeting their targets

The strongest NHS trusts will be released from control totals and offered new reward payments from 2020-21, under the latest financial regime set by regulators.

The measures are outlined in a letter to local leaders from NHS England and NHS Improvement, setting out how different approaches will be taken depending on a provider’s budget position.

The letter, shared with HSJ, said trusts currently in surplus (before receipt of provider sustainability funding) have not been given a control total next year, so will be able to set their own financial plan.

Instead of “financial recovery funding” – which will be made available to trusts in deficit – these stronger organisations will also be offered a one-off “transitional reward payment” worth 0.5 per cent of “relevant income”, providing they deliver a surplus next year as well.

For example, a provider with an annual income of £500m would receive £2.5m. Trusts currently in deficit would become eligible for two reward payments if they reach and maintain a balanced position.

This reward funding had not appeared in previous guidance, and is designed to acknowledge good performance and incentivise others to reach breakeven.

Organisations in deficit have been given control totals and specific “improvement trajectories” until 2023-24, as well as allocations from the FRF. These aim to gradually reduce the number of trusts and clinical commissioning groups in deficit, so that no organisation is in deficit by the end of the period.

As previously outlined by NHSE/I, an efficiency assumption of 1.1 per cent has been set for all providers through the default national tariff.

But the control totals given to those in deficit require additional efficiencies of “at least” 0.5 per cent. For the most financially troubled organisations, the additional ask is likely to rise to around 1 per cent.


Julian Kelly

The new regime has been overseen by Julian Kelly, chief financial officer at NHSE/I.

The letter adds: “Organisations with the largest deficits will be expected to deliver against the more stretching trajectories, and return to balance at the fastest pace. All organisations will be held more robustly to account for delivering financial improvement over the period at these stretching but achievable levels.”

He said the new regime would begin to “reset our regulatory relationship” with organisations, which are able to come out of deficit.

He added: “We believe that such organisations should have the freedom to determine the levels of surplus appropriate to their circumstances and commensurate with their own investment and transformation plans…

“Critically, over the next couple of months we will further develop the regulatory regime to recognise the position of organisations in balance, in receipt of FRF and those of which are off-plan.”

The regime also includes elements designed to encourage system working, including a material proportion of FRF being linked to the achievement of system financial improvement trajectories.

Any changes to control totals or trajectories must be “net neutral” within each system.