• Provider sector deficit falls to £571m
  • But “underlying” position worsens by £700m
  • NHSI highlights major shortage of capital investment, after trusts breach spending limit

One-off benefits helped the NHS provider sector report an improved financial deficit for 2018-19 – but the underlying position worsened by £700m.

NHS Improvement’s year-end performance report showed trusts reported a combined deficit of £571m for the year, compared to a £966m deficit at the end of 2017-18.

However, the year-end position included a beneficial accounting adjustment of £256m after two private finance initiative hospitals were brought on to the government’s books following the collapse of Carillion.

It was also boosted by around £1bn of non-recurrent savings (up from £842m the previous year), which do not improve the underlying position.

The report said the underlying trust sector deficit, which discounts non-recurrent income and savings, has grown to £5bn, up from £4.3bn at the end of 2017-18.

If “provider sustainability funding” is counted recurrently, as is eventually expected, the equivalent figures would be £2.55bn, compared to £1.85bn.

Meanwhile, debt owed to the Department of Health and Social Care, largely in relation to short term cash support, grew to around £14bn, from £11bn a year ago.

The report said: “It is evident that more needs to be done to move to a sustainable position. The gap between tariff and cost means that deficits have become the norm across much of the sector in the last few years.

“A fundamental financial reset has been implemented, to ensure every trust achieves recurrent financial balance by 2023-24. NHS Improvement and NHS England’s new financial regime, developed during 2018-19, will help reduce the number of organisations in deficit by over 50% in 2019-20 and return all organisations to financial balance by 2023-24.

“Further work will be needed on those plans to return providers to financial balance, including addressing levels of DHSC debt held on provider balance sheets.”

Chris Hopson, chief executive of NHS Providers, said the report demonstrated trusts were working “flat out” to meet rising demand, and “in that context what we see here is a strong financial performance”.

He also pointed to an improvement in “implied productivity”, of 2.3 per cent compared to 1.2 per cent in the previous year, which was driven by activity growth.

Sally Gainsbury, senior policy analyst at the Nuffield Trust, said: “Today’s figures show NHS leaders are finally acknowledging that the financial black hole in hospitals and other health services is getting deeper.

“While it is true more money is coming into the health service in the year that has just started, this boils down to just £1bn extra for NHS trusts. That leaves them dependent on continued short term one off cost cuts and emergency funds: an impossible basis on which to plan a stable recovery.

“As the report lays bare, the NHS’s financial problems are far from solved. NHS providers need to know where their funding is coming from for more than one year at a time, to properly plan their recoveries, to upgrade dilapidated buildings and out of date equipment and to recruit permanent staff. At present the continued restrictions on funding and uncertainties over how funds will be distributed is serving to exacerbate an already difficult situation.”

 

Capital budget breached

NHS Improvement has highlighted the comparatively low level of capital spending permitted by the government, after providers breached their combined budget by almost £500m.

The regulator’s year-end report showed NHS trusts spent around £3.93bn on building, maintenance and infrastructure projects in 2018-19, against the limit of £3.46bn set by the Department of Health and Social Care.

This was partly due to unexpected spending on two PFI hospitals in Liverpool and Birmingham following the collapse of Carillion.

NHSI said in its report: “Considerable pressure remains in the short term on core NHS capital budgets, with 2019-20 looking to be a particularly challenging year.

“The NHS faces ever-rising levels of backlog maintenance and is not investing sufficiently in new facilities. The UK has the fifth lowest rate of capital expenditure as a percentage of total health expenditure, out of 34 OECD countries with comparable data.

“Many other comparable countries have rates of capital expenditure at least 50% higher than the UK (eg Sweden, France, Germany). The OECD average for capital expenditure is 8.9% of revenue spend. This compares to a CDEL (capital department expenditure limit) spend in 2018-19 of £3.933 billion (4.5% of revenue spend).”

It follows similar comments from NHS England chair Lord David Prior and the government’s advisor on estates, Sir Robert Naylor.

Trust deficit shrinks but NHSI reports large underlying shortfall