The financial “reset” is likely to lead to a standoff between the centre and local NHS trusts - but the consequences of it failing to deliver would be much more severe. 

Now we come to the crunch. The myriad policy announcements contained within the so-called “financial reset” are the most significant development in health service policy since 2015’s comprehensive spending review.

This intervention was meant to be made earlier in the summer and in a context not thrown into confusion by Brexit and a change of prime minister.

Indeed it is possible to argue that the need for a “reset” has been delayed and put off for much longer. Such a high profile call for the NHS to live within its means was never going to be made in the run-up to the 2015 election and it became very difficult earlier this year as the NHS got caught up in the EU referendum debate.

The overspend on staffing figure was on top of any agreed financial control and had been developed using a methodology that could kindly be described as basic

Now the pent-up need for action has been packaged and released in one hit, which is very much in tune with the “just get on with it” school of policy making favoured by the new PM and chancellor.

The greatest dissonance created by the reset comes from its implication that there should be clinical pay bill cuts at 63 NHS trusts. Today their chief executives were presented with a figure – many for the first time – alleging they were on course to overspend on staffing. This figure was on top of any agreed financial control and had been developed using a methodology that could kindly be described as basic.

Several chief executives who spoke to HSJ threw their hands up in horror and declared the proposals unjustified and unworkable.

In fact, the detail of the proposal is full of caveats stating that there may be a good reason for the reductions and that they should be made “where possible”. One very senior source close to the plans described these figures as “a conversation starter”.

The danger lies in the fact that strong leaders – who tend to run high performing organisations – will hold their own in the robust conversations with the regulator which flow from it; while less confident peers, whose trusts are often struggling, will end up making poor decisions.

Which is, of course, exactly what happened at Mid Staffs.

In theory, the scrutiny supplied by Care Quality Commission should prevent the type of disaster seen in Staffordshire. The re-appointment of Jeremy Hunt as health secretary also signals there is no reduction in the priority given to patient safety.

Regulators are emphasising that a failure to exercise good financial discipline is now much more likely to lead to a P45 than failure to meet a waiting time target

But all this does is place chief executives and boards in a position where they are hung (or placed in special measures) for either quality or finance failures.

The centre’s counter to this Hobson’s choice is that managerial discipline, together with more realistic and forgiving system management, will allow the service to cope with all of its demands.

In fact the word “discipline” features prominently in relation to NHS finances. Regulators are emphasising that a failure to exercise good financial discipline, particularly where it has a negative impact on other NHS organisations, is now much more likely to lead to a P45 than, for example, failure to meet a waiting time target.

This focus on collective responsibility and neighbourly behaviour will please many chief executives, but they will bridle at the idea that it is their attempts to “buy quality” that is the root cause of the problem. They will also know that while some may fall beneath the regulators scythe, widespread sackings are unlikely – as it is a) not the style of NHS Improvement chief executive Jim Mackey and b) would slow change to a crawl.

The result is likely to be a stand-off, similar to that over the 2015-16 tariff proposals, which could have the same effect.

Fearsome consequences

The above commentary would make it very easy to suggest the centre is simply laying a series of impossible asks at the service’s door.

But national leaders are acutely aware – naturally more so than their local counterparts – that if the NHS fails to make significant progress towards dealing with most of its financial problems this year it faces four fearsome consequences:

  • It will be ordered to make specific, significant and rapid cost cuts in this financial year which will hit service quality in a much more serious fashion than at present;
  • Hopes of increasing funding in areas like mental health and primary care in coming years will be abandoned;
  • The NHS will lose any negotiating power with a government at least a third of whose cabinet members are now ideologically aligned to see the NHS as a financial black hole;
  • It will make delivering the service improvements contained with the Five Year Forward View virtually impossible, leaving the NHS without any clear direction of travel.

Those at the centre are also very aware that, particularly in a post Brexit world, the NHS is unlikely to receive extra funding in the next two years. They are also keen to stress that the reset is as much about recognising the difficulty of the choices ahead, and signalling that support for them will go beyond the normal political platitudes.

In a world which appears more divisive every day it would be easy to see the reset as the kind of centre versus local dispute which the service is so familiar with.

The truth is more complex and, as a result, more difficult to resolve. The answer can only lie in dialogue, compromise and an honesty about what can and should be achieved.

Trust chiefs hit back at claims of overspending on staff