Auditors find that parts of NHS 'seriously financially unstable'

The National Audit Office has argued that the NHS has not yet achieved the fundamental transformation in services and finance regime needed to meet rising demand.

As a result of short-term fixes, the auditor reports that some parts of the NHS are now seriously financially unstable, as extra funding brought in by government to stabilise the finances of individual NHS bodies has not been fully effective.

Two reports from the NAO reveal that NHS provider trusts reported a combined deficit of £827 million and clinical commissioning groups failed to balance their books again, reporting a £150 million deficit in the financial year ending 31 March 2019. Trusts are becoming increasingly reliant on short-term measures, including one-off savings (rather than more permanent year-on-year savings) to meet yearly financial targets. These deficits were offset by a centrally managed NHS England underspend, with the government having transferred £4.3 billion from capital to revenue budgets to cope with day to day pressures facing the NHS.

Although the NHS treated more people in 2018-19, it has struggled to transform services, with patient waiting times continuing to worsen and the number of people waiting for treatment continuing to increase. Short-terms loans from the Department of Health & Social Care are effectively being treated as income by these organisations and they have built up a level of unsustainable debts (£10.9 billion in March 2019) which they are unlikely to ever repay.

The NAO concludes that DHSC, NHS England and NHS Improvement should revamp the way the system is funded, including developing a clear long-term capital funding strategy and establishing a more stable funding system that is not reliant on loans.

Gareth Davies, head of the NAO, said: “The short-term fixes that were introduced to manage the NHS’ finances are not sustainable. The Department of Health and Social Care continues to provide some trusts with short-term loans just to meet their day-to-day costs with little hope they will be repaid. This is not a sustainable way to run public bodies. To bring about lasting stability, the Department and NHS England and NHS Improvement need to move away from short-term financial fixes and provide longer-term solutions.”