The NHS has been issued with stark new estimates of the impact the recession will have on its finances.

Foundation trust regulator Monitor has warned that from 1 May trusts applying to become foundations must show they could cope if their income grew only 0.7 per cent a year from 2011-12 onwards, compared with 2.2 per cent next year.

The regulator has also revised the expected efficiency target for NHS providers to 4-4.5 per cent from 2011-12. The net effect could be cost cuts of up to 3.8 per cent a year - almost five times what is needed next year.

“We all know it’s going to be infinitely more grim than the Monitor figures suggest”

Monitor’s revisions came as consultants PricewaterhouseCoopers said their latest projections imply primary care trusts will need to cut their planned spending by up to £6bn between 2011-12 and 2012-13.

Although the Department of Health advised PCTs to plan for 4 per cent real terms growth over the next five years it was now likely the government could only afford 0-2 per cent, the firm said.

Financial gloom continues

A freeze or minimal growth in PCT spending will offer providers little opportunity to offset efficiency targets against activity growth.

Even Monitor’s most likely scenario anticipates cost reductions of 2.8 per cent based on cash increases of 1.2 per cent and efficiency savings of 4 per cent. The revisions are based on the chancellor’s November pre-Budget report. Monitor has already warned it may need to issue new figures after April’s budget.

Foundation Trust Network director Sue Slipman said:”We all know it’s going to be infinitely more grim than the Monitor figures suggest. [But] Monitor cannot second guess the chancellor.”

Ms Slipman said the figures could mean more trusts fail to make foundation status. At present around 20 acute trusts are not expected to do so. But she said Monitor was right to reflect the new economic reality or it would be guilty of “lowering the bar”.

Monitor chief operating officer Stephen Hay said: “Given the uncertainty about the economic outlook and the consequences for public spending, trusts might want to consider a broader and more severe range of scenarios.”

PricewaterhouseCooper’s head of healthcare Ian Wooton said: “PCTs need to stress test their plans. Some are aware of the changing landscape but others [still] assume they will have 4 per cent real terms growth in the long run. This is unlikely.”

Monitor’s new assessment criteria 

  • 2009-10 actual case: efficiency 3%; income growth 2.2%
  • 2011-12 likely case: efficiency 4%; income growth 1.2%
  • 2011-12 worst case: efficiency 4.5%; income growth 0.7%