Treasury gives £1.2bn boost to DH revenue budget

The figures were revealed in supplementary estimates for 2015-16 published by the government on Wednesday afternoon.

The revised estimates will be laid before Parliament today, before being debated and voted on in the coming weeks.

The DH confirmed it will get an extra £205m from the Treasury. It will also receive transfers worth a total of £48m from other government departments, to cover costs such as the administration of the better care fund.

On top of this, £950m will be transferred from the department’s capital budget to help cope with escalating revenue spending.

The capital to revenue transfer follows a major push from NHS regulators for providers to defer their capital spending beyond the current financial year.

It comes amid warnings that the DH could breach its departmental spending limit this year, with the NHS provider sector deficits threatening to exceed £2bn.

The DH said the extra Treasury funding was needed to cover a shortfall in the estimate of returns made by the Pharmaceutical Pricing Regulation Scheme income, after several companies opted out of the scheme.

In 2014-15 the DH received a £250m bailout from the Treasury, along with £640m of capital to revenue transfers. The £731m combined surpluses reported by clinical commissioning groups last year largely compensated for an £822m overspend in the provider sector. But at year-end the department just managed to balance its budget, with an underspend of only £1m.

Anita Charlesworth, director of research and economics at the Health Foundation, said: “Ballooning NHS deficits are now too big to be managed within the government envelope for health, the Treasury has confirmed today.

“Just two months after the spending review, the chancellor has had to dig into his pockets for more NHS funding for the second year running.

“This is an indication of the dire state of NHS finances halfway through its decade of austerity. The capital transfer will help the NHS avoid an immediate crisis but will not solve its financial woes.

“The NHS urgently needs practical support to help it deliver productivity gains. But there must now be serious doubts about whether it can realise the £22bn of savings required by 2020-21 while also maintaining the quality and range of services on offer.”

A DH spokeswoman said: “The supplementary estimate is an opportunity for all government departments to refine their budgets for the financial year and it is not unusual to ask the Treasury for minor changes to funding. In our case a small addition has been approved for a non-NHS pressure – because income from the PPRS was smaller than originally forecast.”

Asked in December about the consequences of the overall DH revenue budget being overspent this year, NHS Improvement chief executive Jim Mackey said it would be “really, really serious stuff”.

He added: “My understanding is it’s a serious parliamentary process, so someone has to go into Parliament… and ask for extra money.

“So I think that’s fatal for a lot of people, on one level. More importantly it will really annihilate confidence in the service.”

Last month, he told the Commons public accounts committee that the provider sector deficit “looks like it is heading towards £2.5bn or perhaps even north of that” but capital to revenue transfers and “accounting adjustments” would kick in before April to bring the number down.

The aim is to get the reported figure down to £1.8bn.