Non-foundation trusts to face 5.1 per cent saving target

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The NHS trust sector is looking to cut £1.5bn from its cost base this year in a squeeze that could prompt questions about the viability of some organisations, David Flory has revealed.

The NHS Trust Development Authority chief executive told HSJ the trusts he was responsible for had set an average cost improvement programme target of 5.1 per cent − roughly £1.5bn of the £30bn they are due to spend in 2013-14.

Asked to estimate how many of the 81 trusts planning on a standalone foundation trust application would struggle to deliver the savings year-on-year, Mr Flory said it was “somewhere in the order of 10-12” this year.

He added this was an increase on the previous year and predicted the picture would be worse still in 2014.

He conceded trusts would not make all of their savings recurrently and he expected 10 per cent of them would come from non-recurrent − or one-off − sources, such as holding job vacancies open.

The former NHS deputy chief executive said finding the savings would be harder than in the past and would force the authority to think about the viability of trusts.

He told HSJ: “Five or six years ago when I was looking at cost improvement programmes of 5 per cent I knew 3.5 per cent of that would be through income increases and 1.5 per cent from cost-reduction. Now I look at it all as cost reduction.

“One of the most important things we will do with trusts on their plans is [to] understand the consequences of reducing their cost base by something [in] the order of 5 per cent. We all know it is a very, very significant task to take on for organisations with 70 per cent of their costs being staff.”

He added trusts would need to assess the impact of these savings on services and workforce to “enable them and enable us to work through [the question] ‘is this [organisation] really sustainable or not?’”

“We won’t have people left in a situation where they’re providing a service that they aren’t confident they can provide properly because there aren’t enough people to do it. Our challenge in that situation, put carefully, will be ‘is this a service that we can still continue to provide with the resource available because of where we are?’”

He added: “That process will inform the very blunt question [for boards] of ‘can we still get there by ourselves?’”

The NHS has been challenged to find £20bn efficiency savings by 2015, in response to projected increases in demand combined with a flat-cash funding settlement.