The day after the government signed into law a settlement in cash for the NHS of £33.9 billion over the next five years, the government’s own auditors the National Audit Office (NAO), warned that years of underinvestment has led to parts of the NHS being “seriously financially unstable” and that some are building up levels of debt which they are never going to be able to repay.

Added to this are warnings from the NAO that the state of the NHS’s infrastructure, some of which is older than the NHS itself, is a danger to patients due to a lack of maintenance.

NHS provider trusts reported a combined deficit of £827 million and clinical commissioning groups (CCGs) a £150 million deficit in the financial year ending 31 March 2019, according to the NAO.

The auditors noted that any extra money from the government to stabilise the finances of individual NHS bodies had not been fully effective.

Trusts in financial difficulty had increasingly turned to short-term loans from the Department of Health and Social Care to get through. The trusts treat these loans as income, and by March 2019 trusts had built up debts totalling £10.9 billion. The NAO notes: “there is no realistic prospect of this debt being repaid.”

No room for efficiency savings

What is also clear, according to the NAO, is that trusts are finding it much harder to make efficiency savings and are becoming dependent on short-term measures to meet financial targets.

In 2018-19, 31% of their savings were one-off, up from 26% in 2017-18. Relying on one-off savings means that trusts must find new savings each year in addition to savings already planned.

Raids on capital budget

The financial stability of the trusts is linked closely with the dire situation with NHS infrastructure – hospitals, clinics and equipment, all of which suffer from a lack of maintenance.

The budget for these things – the capital budget – has been repeatedly raided by the government; from 2014/15 to 2018/19 the government took £4.3 billion from the capital budget to fund day-to-day running costs of the NHS.

Equipment levels, such as MRI scanners, are way lower than in other European countries, and 14% of the NHS estate pre-dates the NHS (1948) and is totally inadequate for modern healthcare services.

Kent and Medway seeking £820m for capital projects

The government also does not know what impact these repeated transfers in budget has had on patients’ services, note the NAO, but with the bill for backlog maintenance standing at around £6.5 billion, and high-risk maintenance at £1.1 billion, up 139% from 2014/15 to 2018/19, the NAO conclude that there is an increased risk of harm to patients.

Repeated funding calls

The NHS trusts have asked for more money for capital costs – over the last three years, NHS providers have requested on average £1.1 billion per year more for buildings and equipment than their spending limits allow.

The government’s approach to infrastructure spending has been piecemeal. Last year the government’s promise was £2.7 billion to rebuild six existing hospitals and a pledge to build 40 in total and upgrade 20 others.

The NAO’s conclusions, however, are that there is a real need to move away from such piecemeal funding promises and that DHSC, NHS England and NHS Improvement should develop a clear long-term capital funding strategy and establish a more stable funding system that is not reliant on loans.

Commenting on the reports, Anita Charlesworth, director of research and economics at the Health Foundation, said: “The NAO has sounded a timely warning bell about the significant financial and operational challenges facing the NHS. Even with the government’s proposed investment, the health service will struggle to maintain current levels of patient care in the face of growing demand, let alone deliver the ambitious improvements to services promised by the NHS Long Term Plan.”

New strategy

A change in approach in funding is also called for by NHS Providers, the organisation which represents the 240 NHS trusts. Its report – Rebuilding the NHS – calls on the government for major investment and changes to the way capital projects are funded.

It asks the government to make investments in infrastructure akin to the national building programme in the 1960s and the investment that took place between 1999-2010; this level of investment could amount to around 100 new hospitals.

The report also calls for capital funding to “at least double” from the current £7.1 billion, and to draw up a 10-year capital investment plan so trusts can plan ahead and modernise ageing infrastructure.

The current government promises are “a much more modest ambition than what was achieved under previous initiatives”, according to NHS Providers, and “the recent capital announcements, though welcome, also fall well short of what is needed.” The report from NHS Providers also emphasises the need for capital funding for mental health, community and ambulance services as well as the acute hospital sector.

Holes in the budget

The widely reported budget settlement for NHS England, praised by government ministers, covers day-to-day running of NHS services, but the wider health budget which provides funds to modernise hospitals, train doctors and nurses, and run prevention services has not been given the uplift it needs.

These other parts of the NHS have had to rely on unpredictable handouts or add-ons, which mean trusts can not plan adequately.

‘The NAO highlights that the NHS did not fully achieve the vision set out in the previous major plan for the NHS. Without substantial, long-term funding commitments to public health, workforce education and training, and capital, the NHS risks ending up in the same situation again.’

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