The Lowdown is running out of vocabulary to sum up the situation confronting the NHS, as each revelation on the financial front reveals a further deterioration. 

A month ago we headlined ‘Worst-ever crisis set to get worse’: but the verbal and written report to last week’s NHS England Board meeting has shown things have slid even further downhill. 

NHSE’s chief financial officer Julian Kelly told the Board the NHS plan faces a funding gap of over £14 billion by 2025: he warned that this raises real questions now over whether commitments on cancer, mental health and more are affordable. But even that understates the scale and immediacy of the problem. His report’s executive summary shows that the gap is even bigger, and still growing:

“In total we have committed to delivering £12bn of annualised savings by 2024/25 including reducing exceptional funding for covid. The impact of higher inflation this year and the potential recurrent effect of this year’s pay settlement and other responsibilities transferred to us could add substantially to this. In addition to this we could face a further £6-7bn depending on how inflation feeds through into pay and other prices next year.”

So the gap to be bridged by “annualised savings” (aka cutbacks) by 2025 is likely be upwards of £18-£19bn. The board paper admits all of NHS England’s initial plans were based on three false assumptions:

  • typical levels of inflation of c2% per year 
  • Covid-19 demand and additional costs would reduce significantly. 
  • no significant reduction in capacity of the social care system

Instead the situation is very different:

  • CPI inflation is currently at 9.9%, and expected to rise further before (hopefully) eventually falling back
  • Covid-19 remains “a significant draw on NHS resources” – with MORE beds occupied by Covid patients this year than during 2020 or 2021: “on average in 2022 so far 9,743 beds have been occupied each day by Covid-19 patients compared to 7,691 in 2021 and 7,313 in 2020.” 
  • “The domiciliary care workforce [55% of whom are on zero hours contracts] has reduced over the past year and as a result the ability to discharge to people’s homes is highly challenged.”

The latter point helps explain why “The number of patients in hospital for more than a week is around 7,000 higher than it was before the pandemic, largely because of difficulties in discharging patients from hospital.”  The combination of an average 12,000 patients per day in hospital who should have been discharged to social care and 9,700 beds occupied by Covid patients means over 20% of NHS acute beds in England are tied up and unavailable for emergency patients or for those needing elective operations.

Inflation is increasing the cost of non-pay goods and services, but also adding to the pressure to increase beyond the hopelessly inadequate £1,400 flat rate NHS pay award – which was in any case not fully funded. Even while health unions are balloting for strike action seeking a much bigger increase for this year, NHSE is looking ahead to future implications:

“If headline pay awards in 2023/24 were to track this year in response to higher inflation and similar to private sector earnings, and non-pay non-drugs inflation is at 9%, then the further cost increase next year (above the level assumed in current financial plans and above the recurrent impact of 2022/23’s additional costs) could be up to c£6-7bn.” 

However the Treasury has insisted that despite surging inflation there will be no revision of last autumn’s spending review, which assumed pay rises of no more than two per cent over the next three years. 

And while NHSE is adding up the scale of the likely shortfall, Integrated Care Boards are being told to plan to generate savings which fall way short of the likely total. NHSE’s board paper confirms warnings in July from the Nuffield Trust’s Sally Gainsbury that this year’s NHSE budget “was planned to be 1.4% smaller in real terms in 2022/23 than it was in 2021/22,” and already required a “total efficiency from NHS systems” of around 5% (£5.6bn).  

On top of this the latest plans seek further “savings” of just £6.4bn in the next two years, equivalent to 2.9% of budget (£3.6bn) in 2023/24 and 2.2% (£2.8bn) in 2024/25. 

So even if all of the literally incredible targets for savings are achieved, they would add up to just £12 billion – only two thirds of the likely total gap, which could yet grow wider.  But the chances of generating even this much are slim to non-existent. As NHS England points out in the same Board paper:

“These [2023-2025] annual efficiency requirements – agreed by the NHS … are higher than the NHS has historically delivered (c1%/year).” 

Sally Gainsbury has explained the recent history of under-funding of the NHS coupled with unrealistic and inflated assumptions of what “savings” could be generated – effectively rolling along a deficit that has now grown to £8bn.

The Lowdown has warned that the 42 new Integrated Care Boards were set up in July with huge underlying deficits, and few if any plans to generate savings on anything like the scale that would be required. Nevertheless all but five of them somehow managed to cobble together plans that appeared to promise to achieve break-even, and NHS England nodded them through. But now with winter coming and a tight schedule to identify and make any savings, two thirds of ICBs are already lagging behind on their plans.

Earlier this month HSJ also reported that only 7 of the 42 ICBs have delivered targets for improving mental health services set out in the 2019 Long Term Plan. This comes as the Royal College of Emergency Medicine highlights the problem of delays in treating mental health patients who seek help via A&E, with half of Emergency Departments in England reporting waits of 12 to 24 hours for a child or young person to see a specialist mental health professional, despite the accepted standard for adults being a one hour wait to be seen. 

The Royal College of Psychiatrists now says its research found 43% of adults with mental illness saying long waits for treatment have led to their mental health getting worse. Almost a quarter (23%) have to wait more than 12 weeks to start treatment, with many so desperate they turn to A&E or dial 999.

Meanwhile Shaun Lintern in the Sunday Times has revealed that NHS England has identified 10 areas including big city regions like Birmingham and Leicester, “which it fears could see a ‘system failure’ this winter when 999, A&E, hospitals and social care all collapse.” The first few days of autumn have already seen trusts around the country declaring critical incidents or cancelled operations due to overwhelming demand and struggles with discharging patients.

All this comes before we hear whether or not Liz Truss’s government intends to implement her suggestion/threat to slash £10bn per year from funding allocated to the NHS from the ‘health and care levy,’ and hand it to social care.

Last month Sir Charlie Bean, a former deputy governor of the Bank of England argued public spending would have to be cut back so hard in the wake of the ‘mini-Budget’ that it could threaten the existence of the NHS as a free service.

HSJ reports NHSE chair Richard Meddings warning the Board meeting that the savings required could add up to 10 per cent of the NHS’s cost base, which would mean “making presentations to the government about various options for their consideration”. 


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