Tech spend under pressure as NHSE told to ‘cut core funding’

NHSE chief financial officer Julian Kelly told a meeting of NHS England’s board: “We have been asked to see if we can cut core NHS funding – at the moment that is probably to the tune of £500m.”

Mr Kelly said achieving this would likely involve “slowing down” some transformation programmes and ambitions from the NHS long-term plan, including “how fast we go on the change in technology, on some of the innovation stuff we have spoken about… and the prevention programme”.

The request from the Department of Health and Social Care was “as a consequence of needing to find funding to deal with the government’s Living with Covid plans and the cost of the public health policy around Test and Trace”, Mr Kelly said.

He added that rising inflation could add an extra £1bn in financial pressure, telling the board “we’re going to have to look at what that means for our ability to deliver NHS goals in the round.”

It was reported in February that health and social care secretary Sajid Javid and chancellor Rishi Sunak were at loggerheads over whether the DHSC should receive additional funding for covid testing on top of the health service’s spending envelope. It is thought the dispute ultimately ended with the DHSC receiving more than £1bn less budget than it believed it required in 2022-23 to pay for ongoing covid costs such as testing and vaccines.

Some of this is now being passed on to NHSE, though it is unclear if that is specifically related to paying for testing of NHS staff, or wider covid testing. There remains uncertainty over how lateral flow tests for NHS staff will be paid for from 1 April, with the government having refused to say it will pay for them. 

A report to today’s NHSE board meeting says: “We are currently finalising our financial strategy and arrangements with the DHSC ahead of the financial year. This includes a request to identify several hundred million pounds to contribute to the costs of the continued testing regime set out in the government’s Living with Covid strategy.”

It adds: “This is in addition to the other financial risks we face, including increased price inflation.”

Mr Kelly told the meeting existing savings targets for the health service were already “pretty challenging” and indicated NHS England was considering ways it could avoid passing on higher inflation costs “without that simply being another pressure straight into frontline services”. 

It comes as the Chancellor presses the NHS to find further savings in 2022-23. At the Spring Statement yesterday Rishi Sunak said the health secretary’s reform plans would “ensure every pound of taxpayers’ money is well spent”.

Ahead of the mini-budget Mr Sunak announced he was doubling the NHS’s annual efficiency target to 2.2 per cent, even though many trusts were already facing rates well above this. The scale of the savings required is set to grow further as inflation means the 2022-23 funding boost buys less in goods and services.

However, NHS England CEO Amanda Pritchard confirmed that the chancellor’s announcement was not a new ask, telling the board it did not bring an “additional expectation of efficiency over and above what’s already been shared at this point in time”.

The Institute for Fiscal Studies said higher inflation meant the NHS England budget would now grow by 3.6 per cent in real terms over the next three years, down from 4.1 per cent under previous forecasts. The think tank said it would cost £2.4bn by 2024-25 to compensate the NHS for rising prices.

Mr Kelly also raised concerns about discharge to assess funding coming to an end in April, warning it would have a “knock-on impact on to emergency care performance”. Under the initiative, patients’ care support is funded centrally when they are medically ready to leave hospital, avoiding traditional delays caused by waits for a care home space or community care package.

Board member David Behan, who is also chair of Health Education England, said the fund had been “massively important” and warned the cut presented a “real and significant” risk.

Last year Chris Hopson and Matthew Taylor called for the scheme to be extended, describing it as “one of the conspicuous successes of the NHS response to the pandemic”. The pair said it had worked for social care, the health service and patients.

NHS Providers deputy CEO Saffron Cordery said: “A cut as substantial as £500m creates a very real risk of trade-offs, which could affect trusts’ ability to increase activity and improve the quality of patient care – something no one wants to see.

“Trust leaders will be looking for clarity as soon as possible about where the cuts to planned spending will be made.”

Matthew Taylor, CEO of the NHS Confederation, said the savings task facing frontline services was ”nigh on impossible”.

He said: “NHS leaders understand the need to deliver efficiency savings and they are working towards that. But the ask of them needs to be realistic and that is fast not becoming the case.

“There is a growing gap between what ministers and central officials have committed the NHS to deliver and what is realistically possible. Such a gap risks demoralising staff and disillusioning the public.”

Updated through 24 March from board meeting and comments sent to HSJ.