Treasury sanctions another £400m bailout for DHSC

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£420m of reserve funding has been added to the DHSC revenue budget in 2019-20
Comes despite 2019-20 being the first year of an improved funding settlement for the health service
Funding uplift roughly matches the amount by which the NHS was “off plan” at the end of December

The Treasury has sanctioned an in-year funding increase of more than £400m for the Department of Health and Social Care, which will effectively help bailout deficits in the NHS.

Supplementary estimates, which set out in-year amendments to departmental budgets, show £420m of reserve funding has been added to the DHSC revenue budget in 2019-20 to cover “unforeseen in-year pressures”.

The DHSC budget totals around £134bn, the bulk of which relates to NHS spending.

It comes despite 2019-20 being the first year of an improved funding settlement for the health service, with a real terms increase of 3.6 per cent. This is also the largest increase planned over the course of the much-vaunted five-year funding settlement that was announced by the government in 2018.

Although the number of NHS providers in financial deficit has reduced over the last few years, some have continued to significantly overspend, meaning the sector continues to struggle to reach a breakeven position.

In some previous years, commissioners have held a “risk reserve” for the provider deficits, but this was not thought necessary once the overall funding envelope had increased.

Last month, Julian Kelly, the NHS’ chief financial officer, said the combined position of providers and commissioners was “off plan” by around £400m at the end of December. This roughly matches the figure provided by the Treasury, which should ensure the DHSC avoids breaching its annual spending limit.

A DHSC spokeswoman said the uplift represented a backdated increase to the “non-NHS” element of the departmental budget – ie the funding for the department and other arms-length bodies not including the NHS.

She said it was approved as part of the negotiations over the non-NHS parts of the budget beyond April 2020, which were not covered by the five-year funding settlement.

Sally Gainsbury, senior policy advisor at the Nuffield Trust, said: “This is a bailout for the Department of Health and won’t provide any form of release for any providers or commissioners this year. It doesn’t help address the structural problems that providers are facing.”

She stressed the underlying provider deficit – which discounts non-recurrent savings and one-off benefits, stands at around £5bn.

The Treasury did not wish to comment.

The supplementary estimates also confirmed the increase to the capital budget that was announced in the summer last year.