Trusts must reduce deficits by two-thirds to hit official forecast

According to analysis of official mid-year data by HSJ, more than 60 trusts have fallen behind their financial plans in the first six months, while dozens more must deliver significant run rate improvements to hit their forecasts.

Despite this, just 20 trusts made downward revisions to their forecast outturns after the first half of 2017-18.

As reported last week, the official forecast suggests a trust sector year-end deficit of £623m, compared to the planned £496m. But NHS Improvement admitted there are “significant risks” to delivering this position due to heavily “backloaded” savings plans.

Trusts that have formally revised their forecast (figures exclude STF)

There are now stricter rules in place for trusts wanting to make formal forecast revisions, but more trusts are likely to go through the revision process in the second half of the year.

To understand the level of risk and compare trusts, it is necessary to strip out the impact of the sustainability and transformation fund, which is only awarded if financial targets are delivered and must be treated as non-recurrent.

Without the STF, the actual deficit in the first half of the year was £1.78bn, a monthly run rate deficit of £300m. To hit the year-end forecast deficit of £2.42bn (with the £1.8bn STF excluded), the trust sector would have to cut its monthly deficit by two-thirds to less than £107m.

The actual deficit in the first half of 2016-17, without the STF, was £1.55bn so the position has deteriorated compared to the same time last year.

Among the trusts that must deliver major improvements in the second half of the year, a number may have significant one-off transactions in the pipeline that will help improve their position. Royal Free London Foundation Trust, for example, is expected to benefit from a large land sale.

Trusts with their forecast most at risk (figures exclude STF)

The Nuffield Trust said the current rate of monthly overspending would result in an underlying deficit of £3.9bn, compared to £3.7bn in 2016-17. This estimate strips out the STF as well as savings made through lands sales and other one-off gains.

The NHSI quarter two report said: “Last financial year, the improvement in financial performance in the second half of the year was highly dependent on non-recurrent items, which do not address the longer term financial sustainability of many providers.

“This year there are fewer non-recurrent solutions available, which means that 2017-18 will be another financially challenging year. In addition, the cost improvement programmes are ‘backloaded’ to the latter part of 2017-18 and this introduces a higher risk to delivery.”

HSJ asked trusts in the table above to explain how they would improve their run-rate to meet their control total. 

Northern Lincolnshire and Goole FT said it will be submitting a revised forecast, with their current planning suggesting a deficit of £43.3m.

Barts Health Trust said it is still expecting to benefit from a £30m “profit on disposal of fixed assets” in the second half of the year.

Guy’s and St Thomas’ FT said it is “still identifying additional opportunities to ensure the control total is achieved”, but added: “Significant non-recurring measures will have helped the trust address the financial target for 2017/18 including VAT recovery, recovery of prior year disputed income, reviews of reserves and prior year accruals and PDC payments less than planned estimates.”

Royal Brompton & Harefield NHS Foundation Trust said it is still confident of delivery and pointed to an investment property revaluation which will help improve the position.

York Teaching Hospital FT said it will review progress with NHSI at the end of the third quarter.

University Hospitals of Leicester Trust said it is still expecting to hit its forecast, but did not explain how it expected the run-rate to improve.

The other trusts did not address HSJ’s questions.