Treasury claims £650m legacy debt pot

Commissioners are now asking why their predecessor organisations were required to set aside the huge sum – which was intended to ensure CCGs did not come into being with inherited “legacy debts” – if it was not going to be available in future years.

Department of Health accounts show the provisions made by PCTs contributed to a large revenue surplus for the department in 2012-13, which was returned to the Treasury and used to reduce the national budget deficit.

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In 2014-15 £250m will be topsliced from CCG budgets to cover anticipated costs of settling the backdated care claims.

During 2012-13 PCTs made provisions totalling £800m to pay for financial liabilities expected to arise in future years. Of that, £650m related to retrospective continuing healthcare claims.

However, it has now emerged that CCGs will not be able to access any provisions set aside by their predecessors, meaning future continuing healthcare payouts will be funded from CCG allocations.

An 18 March letter from NHS England’s director for commissioning development, Ros Roughton, to CCGs’ representative body NHS Clinical Commissioners said: “Under Treasury accounting regulations the payment of legacy provisions count against the NHS budget only when they are actually paid.

“Therefore any provisions made in prior years are not available under Treasury accounting to cover these commitments.”

NHS Clinical Commissioners director Julie Wood replied, in another letter seen by HSJ, that Ms Roughton’s explanation “misses the point”.

“The NHS paid once… and now a sub-set of the NHS commissioning system – CCGs – are being charged again,” she wrote.

The provisions were set aside by PCTs after promises by former health secretary Andrew Lansley that CCGs would have no “legacy debts” inherited from their predecessor organisations.

NHS Clinical Commissioners co-chair Steve Kell said: “We should ask why PCTs were asked to make provisions in 2012-13 if the money couldn’t be used in future years under Treasury accounting rules.”

In 2014-15, historic continuing healthcare claims will be paid out of a £250m “risk pool”, funded through a flat 0.4 per cent topslice of CCG budgets. NHS Clinical Commissioners points out that some CCGs are receiving only a 2.14 per cent uplift next year, the minimum required to offset inflation, so after the topslice is applied those CCGs face a real terms funding cut.

In 2013-14, NHS England has paid out £88m for retrospective continuing healthcare claims on behalf of CCGs.

The DH accounted for the provisions set aside by PCTs last year as “annually managed expenditure”. As a result, they contributed to a £1.5bn underspend against the DH’s revenue departmental expenditure limit at the end of 2012-13. DH accounts said this underspend was returned to the Treasury to “help in wider fiscal deficit reduction”.

A source with close understanding of DH finances told HSJ that while CCGs had inherited liabilities for continuing healthcare from PCTs, they appeared not to have inherited the provisions PCTs made.

The source said the use of provisions is common in the NHS provider sector, helping pay for one-off costs such as clinical negligence claims.

However, the 2012-13 PCT provisions were unusual because they constituted a large amount of money switching over from normal revenue spending to annually managed expenditure, and coincided with the abolition of PCTs.

The source added that the annually managed expenditure budget was not designed to deal with “big shocks” like the sudden appearance of £800m of PCT provisions, and was better suited to managing “little net movements”.

Asked why PCTs were encouraged to make provisions that could not be rolled over beyond 2012-13, a DH spokeswoman said: “The DH instructed PCTs and CCGs to report their finances within the guidelines set out by the Treasury.”