Jim Mackey’s warning that the NHS provider sector will stay in the red during 2016-17 was notable as much for its timing as its content.

As recently as December the national planning guidance from NHS England was trumpeting the ambition to clear the £2bn plus provider sector deficit by March 2017. It was widely briefed that this commitment was part of the deal in which the Treasury allowed the NHS’s extra funding to be frontloaded.

Now, less than three months into the new financial year, the NHS Improvement chief executive has said what most had thought from the start: that the aspiration is not credible. His comments were no doubt encouraged by the dramatic worsening of trust deficits in the final few months of 2015-16, revealed by HSJ this week

It is very clear from Mr Mackey’s HSJ interview that the size of any potential year-end 2016-17 deficit is still very much in the mix. NHS Improvement, NHS England, the Department of Health and the Treasury are still arguing the toss.

HSJ would wager an eventual deficit “target” of around £500m will be reached. If there is any attempt to demand a significantly lower figure, then Mr Mackey, who confirmed he will return to Northumbria in 15 months’ time, is likely to say “find yourself another fall guy” and head back north early.

While the two chief executives are to be praised for their directness, they will know future negotiations with the Treasury will be complicated by this act of “bad faith”

Mr Mackey’s clear signal on the deficit follows the same, more coded, message being relayed by NHS England chief executive Simon Stevens during his recent interview on The Andrew Marr Show. Mr Stevens’ genius was again displayed as he delivered what will have been a very unpalatable message to George Osborne as part of a high profile intervention which bolstered the Chancellor’s claims that an EU exit would damage the UK economy and therefore the NHS.

While the two chief executives are to be praised for their directness, they will know future negotiations with the Treasury will be complicated by this act of “bad faith”.

The good news from this admission is that the financial “control totals” being negotiated with trusts are more likely to be manageable.

The bad news is that the provider sector will start the 2017/18 financial year still a long way from breaking even and without the cushion of 2016-17’s frontloaded funds. There is also no suggestion that a deficit is being allowed because more money is being transferred into transformation efforts.

While some plans are robust, others are ringing alarm bells at the regulator – which is keen not to swap a financial crisis for a care quality one

And, of course, getting to £500m or whatever the final figure is, is very far from a done deal.

With around 100 trusts still to agree their control totals, NHSI’s strategy to begin reducing the deficit has yet to be fully revealed. However, there is likely to be a particular focus on the 40 or so trusts which have seen significant increases in their pay bill over recent years. Again, Mr Stevens’ recent praise of leaders who had the “honesty” to rethink these rises is telling.

No obvious candidate

NHSI is heroically forecasting the sector’s bill for agency staff can be reduced from £3.7bn to £2.5bn this year. HSJ understands aggregate trust plans suggest an even bigger reduction.

While some plans are robust, others are ringing alarm bells at the regulator – which is keen not to swap a financial crisis for a care quality one.

There is, of course, one final implication to be drawn from HSJ’s interview – the search for Mr Mackey’s replacement needs to get under way soon. Fifteen months is not a long time, given the importance of the role and fact there is no obvious candidate who wants the job.

The new CEO will arrive just as the funding increases effectively disappear. Mr Mackey’s performance in returning the service to financial stability is perhaps the biggest factor in making the role look attractive to anyone with the knowledge to take it on.