NHS England struggling to balance £97bn budget

A report to the national commissioning body’s board meeting this week by its chief financial officer, Paul Baumann, showed that three months into the financial year he was still unable to present it with a balanced financial plan for approval.

Plans submitted by clinical commissioning groups and NHS England’s own direct commissioners in late June showed an aggregate overspend of £137m against the commissioning system’s £97.3bn spending limit for the year.

NHS finance experts told HSJ it was a sign that the commissioning system - which has to date fared better than the provider sector amid prolonged austerity - was now under huge financial strain. They warned the NHS overall could tip into the red in 2014-15, ahead of a widely anticipated crisis of health finances in 2015-16.

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Richard Murray, the King’s Fund policy director and former chief analyst at NHS England, said while the projected overspend was small compared with commissioners’ overall resources, “the fact that they can’t get it down to zero is really significant”.

He told HSJ: “It shows the commissioning system is really grinding its gears at the moment.”

Mr Murray added that activity levels - particularly emergency activity - appeared to be “running really high” in parts of the NHS, and could already be ahead of plan for some commissioners.  

“I think there’s a reasonable chance that the NHS will go into deficit [in 2014-15],” he said. “At the moment, unless activity growth in the NHS slows down very quickly, this chance is getting higher and higher all the time.”

Health Foundation chief economist Anita Charlesworth agreed that this was a “very significant moment”.

“It has been apparent for some time now that providers are finding life very difficult, but the commissioning system has always been more financially robust,” she said. “Now, if commissioner plans… don’t deliver balance that does threaten the overall financial viability of the NHS.

“To date, deficits in the provider side have been offset by underspends on the commissioning side.

“This is a tipping point.”

She warned: “If the commissioning system can’t cope in 2014-15, it doesn’t have a hope in 2015-16 when the affordability challenge is more than doubled.”

A number of commissioners have been asked to revise their plans following the last submission on 20 June.

An NHS England spokeswoman this week said the “few remaining organisations that are required to re-submit plans are expected to do so imminently” and NHS England was “expecting these plans to lead to an overall
balance”.

Mr Baumann’s board paper indicated there were two main areas driving the overall overspend in commissioning plans.

The first was a “small number of CCGs” that were planning either increased deficits in 2014-15, or the use of surpluses made in previous years. CCGs are unable to access past years’ surpluses this year, as NHS England has allocated the entire £400m of surplus the commissioning system is permitted to “draw down” to offset a potential £800m overspend in its own specialised commissioning budget.

The second was the struggle to balance the specialised commissioning budget itself. While nine of the NHS England area teams that commission specialised services have produced breakeven plans, the London team is planning a £65m deficit.

Another paper going to NHS England’s board this week suggests specialised commissioners in the south of England have only been able to set balanced plans on the assumption that they will receive a £50m budget transfer from CCGs in Wessex, Surrey and Sussex.

HSJ understands that NHS England has asked commissioners in these areas to revisit work that was done to divide budgets between CCGs and NHS England following the abolition of primary care trusts.

However, a spokesman for Horsham and Mid Sussex and Crawley CCGs said they believed they had “correctly funded the transfer to NHS England”.

He added: “Any material change to our allocation will not only affect the CCGs’ ability to deliver our financial plans in 2014-15 but could also risk the delivery of local services for patients.”

A spokesman for three other Sussex CCGs, covering Eastbourne, Hastings and Lewes, said work to review the budget split “has not been concluded and therefore currently there is no evidence to support the position that additional resources should be provided by CCGs”.