The rapid pace of change and abrupt lurches in direction of England’s NHS leadership at national level are creating widespread confusion, along with the demoralisation that flows from impending job losses and yet another major top-down reorganisation.
After Keir Starmer’s surprising intervention last month NHS England (NHSE) itself is set to axe half its staff by the end of this year, and to be abolished in the next two years once the government passes the necessary legislation.
The slashing back of thickets of management is set to spread much wider, down to local levels, in the quest for cash savings: but there is no consistent picture of the financial situation that the cutbacks are supposed to help remedy, let alone a clear vision of a way ahead.
The case of the vanishing deficit
Just three weeks ago, in his first speech to assembled Integrated Care Board (ICB) leaders, NHS England’s new chief executive Sir Jim Mackey focused heavily on the initial forecast of a £6.6bn deficit in 2025-26. He claimed this had “scared the living daylights” out of some in government, and he obviously wanted to scare NHS local bosses.
Mackey went on to demand local Integrated Care Systems (ICSs) take strong action to balance the books, including a 50% cut in ICB management budgets and telling trusts to cut back their “corporate services” budgets to pre-pandemic levels.
But Mackey’s April 1 written follow-up to the March 13 speech presents a completely different set of financial figures. His letter to ICB and trust leaders, headed ‘Working together in 2025/26 to lay the foundations for reform’, claims fresh financial plans had been produced.
Mackey now says these include plans for cost savings that have reduced the “headline deficit” to just £311 million in 2025/26 (with just five of the 42 ICBs in the red), after allocating £2.2bn in “deficit support” payments.
If this is to believed, no less than £4bn of projected deficits have just been wiped out in just two weeks, with no actual changes on the ground.
We will eventually learn only part of what has happened to bring about this dramatic apparent change of fortunes. It’s clear that the extra £4 billion has only been “saved” on paper. As The Lowdown has consistently pointed out in our periodic reviews of ICB board papers, huge savings are proposed and then claimed to have been achieved without any detail on how they are delivered.
However, it’s not just future projected deficits that are being magically made to disappear. In the last few weeks, NHS England has been busily distributing additional bail-out payments, enough to enable some Integrated Care Systems to claim they have hit their financial targets for 2024/25.
That’s how, on March 27, just two weeks after Mackey’s big speech calling for cuts, NHSE’s departing chief financial officer Julian Kelly could give his final report to the Board, claiming that the year-end position of trusts and commissioners was dramatically better than expected, with “25 of the 42 systems (60%) … forecasting a breakeven position.”?
Mr Kelly said ICSs had (on latest figures) fallen just £500m short of the massive £9.3 billion target for efficiency savings in 2024/25 (equivalent to 6.1% of their total allocation, and even more ambitious than the Lowdown’s estimate of £8 billion).
Once again, though, there is little information at all about what steps were taken, what services centralised, rationalised or scaled back, how many treatments delayed, or how many vacancies frozen to save such a large amount of a budget that we know has been so tightly stretched for so many years.
Extra cash handouts
On April 3 the HSJ filled in some of the background when it revealed that at least 10 ICSs across the country had received last-minute bailouts to cut or wipe out deficits in the last few months of the financial year, with around £200m distributed to at least 10 ICSs, and the true total likely to be much higher.
So it seems that Mackey’s new financial regime is not so new after all, but continuing in the long-standing tradition of demanding ICSs submit implausibly high targets for cash savings, followed up by surreptitious bail-outs towards the end to make it look as if they have reached them. One trust finance director told the HSJ that the bailouts undermined “credibility” for management attempting to push through cuts, complaining: “We spend all year saying how bad it is and then cash arrives at the last minute. People in the organisation just don’t believe us.”
Transparency With no hint of irony Mackey’s document Working Together … claims that “the shift to greater openness and transparency will help us become more accountable to our public and our staff and less so to the centre.”
But there has been zero transparency with the public or with NHS staff over the implementation of efficiency savings targets. Any discussions that may have taken place at ICB or Trust Board level must have been held in private session.
Mackey and new NHSE chair Penny Dash have taken apparently different positions on the implications of the changes being forced through by health secretary Wes Streeting and Prime Minister Keir Starmer.
Ministers have been keen to pose as radical disruptors and enemies of bureaucracy and unaccountable quangos, and Mackey has emphasised the level of duplication of roles between NHS England and local level Integrated Care Boards as well as the Department of Health and Social Care. However Dash has taken a different line, speaking out to oppose branding NHSE as “the world’s biggest quango” and its employees as “bureaucrats” – and even baulked at referring to the “abolition” of NHSE. She prefers to describe the 2-year run-down as “integration” with the DHSC. Whether this makes any of the affected staff feel any better is open to doubt.
Who to keep, who to cull
However it is dressed up, the reality of the changes announced last month is an accelerated loss of thousands of jobs, with unpredictable consequences.
Mackey’s plan sets out the priorities for staff to be retained, and this too will inevitably cheese off the staff who realise they are not included among the “talent” to be kept on for the future. The challenge, Sir Jim argues is:
“to manage the transition as carefully as we can while recognising:
· the need to maintain some core staff, such as … commissioning staff and, in the short term … continuing healthcare staff
· the need to maintain or invest in core finance and contracting functions in the immediate term
· the need to invest in strategic commissioning functions, building skills and capabilities in analytics, strategy, market management and contracting.”
The aim is to agree by the end of April on a “reasonable running cost per head of population” to run a “model ICB”, and for ICBs to use this to: “create bottom-up plans that are affordable within the reduced running cost envelope,” to be signed off by the end of May and implemented by the end of the year.
So what are the jobs Sir Jim regards as expendable? ICB chiefs are urged to “look carefully” at:
· “assurance and regulatory functions” – such as safeguarding and infection control – where this is already done in providers.
· Performance management of providers
· And “comms and engagement” which “exists in local authorities, providers and [NHSE] regions.”
However the providers also come under scrutiny: Mackey notes that their corporate costs have risen by 40% since 2018/19, and 56% if pay and pensions are included. So all NHS providers are now expected to “reduce their corporate cost growth by 50%”.
It’s not clear if this means reducing cost growth since 2018, or limiting cost growth in the new financial year. A straight 50% cut in providers’ current corporate costs would reduce them to well below 2018 levels, and cause all kinds of problems.
Mackey also notes the increase in the number of “non-patient facing corporate nursing roles” in trusts and ICBs since 2019. He says NHSE has begun a process to identify where above average numbers of such staff are in post and for these excess staff to be removed during this year.
One positive ray of light on a darkening landscape is that the cap limiting how much income trusts could generate from increasing numbers of elective patients they treat has now been lifted, allowing some trusts to achieve a major boost in revenue.
Subcos – but on what terms?
In line with his speech on March 13, Mackey also announces changes to make it easier for providers to get approval for plans to transfer their non-clinical staff into wholly-owned subsidiaries (or ‘subcos’), promising more guidance to come after discussion with the unions. This aspect of the Mackey plan has been met with stiff resistance from the unions. The largest health union, UNISON, has rejected any further extension of what has always been a hotly-contested policy of effectively dumping staff out of the NHS in pursuit of cash savings (which in almost every case depend above all on avoiding payment of VAT). Mackey’s speech seems to have referred to subcos as above all a way to save on VAT, while the HSJ report noted that “Subcos have often saved further money by watering down NHS pay scales and terms and conditions for newly employed staff, including access to the NHS pension.” Once again Sir Jim has swiftly back-pedalled, to argue now that “We should only be supporting new subcos that are on NHS terms and conditions,” and state specifically that:
“NHS terms and conditions including the NHS pension should be extended to staff recruited by trust subcos in future. […] We shouldn’t be extracting benefits from the terms and conditions of poorly paid staff.”
However UNISON has pointed to the number of subcos that have worsened terms and conditions for staff after they have been transferred against their will to subcos. An HSJ survey in 2023 found just two subcos out of 18 offered new employees NHS terms and conditions. UNISON’s Head of Health Helga Pile told the HSJ that “Regardless of whether initial assurances are given”, moving staff into subcos would cut them off from development opportunities, and would “ultimately represent a deliberate attempt to create a two-tier workforce.”
This, she said “runs directly contrary to the stipulations of the government’s Employment Rights Bill.” And UNISON warns that a potential change to Treasury rules means there is a strong possibility the VAT benefits of using subcos may also soon be removed.
A policy to balance the NHS books through tax avoidance should be something that any ministers ought to reject on principle, especially Labour ministers whose manifesto committed to bringing an end to the 2-tier workforce.
But of course if the VAT loophole is closed off it will force yet another shift of position from Sir Jim and his dwindling circle of bureaucrats who are managing the new austerity-driven decline in the NHS. We can predict that however this goes NHS staff and the public will be the last to know.
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