Updated: DH forecasts tightest financial year end since 2006

According to last week’s Budget statement, the DH is forecasting revenue spending of £105.6bn for the current financial year. Although last year’s Budget Book said that the planned spend for the year was £106.9bn, the difference is entirely accounted for by the transfer of a £1.4bn learning disabilities grant to the Department for Communities and Local Government.

It means that the DH does not expect to underspend against its revenue limit.

A DH spokeswoman confirmed that the DH’s expected year-end position was “full spend against [a] £105.6bn budget”. She added that for capital expenditure, the department was predicting a “£0.1bn underspend against [a] £4.4bn budget”.

The Budget figures do not represent the DH’s final year-end position – that is expected to be published in July. However, if the forecasts turn out to be accurate, 2013-14 would be the first year that the DH has not achieved a revenue surplus since 2006-07.

Anita Charlesworth, chief economist at the Nuffield Trust, told HSJ that the lack of a surplus was “a sign of just how phenomenally difficult this year is”.

“The DH normally underspends by one per cent,” she continued. “What this shows is how the finances are deteriorating very quickly across the NHS, and sooner than we all thought they would.

“After this, it is really difficult to say how the NHS will get through 2014-15, and 2015-16 does not look doable.”

Bill Morgan, who was a special advisor to Andrew Lansley at the DH and is now a partner at Incisive Health, said: “This is unheard of since the deficits crisis of the mid-2000s.

“A [departmental expenditure limit] breach is well within the margin of error here, and it’s hard to see how it will get any better in 2014-15 or 2015-16. It’s cross-your-fingers-and-hope time at the DH.”

King’s Fund chief economist John Appleby agreed that 2015-16 was a “crunch year” because of the “opportunity cost” of transferring an extra £2.4bn of NHS money into the better care fund. He added that NHS England’s spending assumptions were for flat cash increases until 2021, and that this would lead to a drop in the spend on the NHS as a proportion of the whole economy from around 8 per cent to around 6 per cent.

The news comes only weeks after the DH risked a dispute with NHS workers over a pay deal that saved just £200m in 2014-15.

Earlier this month HSJ research found that more than a third of hospital trusts were expecting to finish 2013-14 in the red.

In a recent interview with the Guardian the departing NHS England chief executive Sir David Nicholson said the service needed a “change fund” over and above its current funding settlement if it was to remain sustainable in the future.

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