News / Forecasting must improve despite ‘fantastic’ turnaround

Mr Flory told the HFMA annual conference in London at the beginning of December that planning had to improve.

‘Be clear about your financial plans and what the risks are so that you have greater certainty earlier in the year of what the outcomes are going to be,’ he said.

He highlighted quarter three results in previous years that bore little resemblance to outturn figures. He accepted that there were behavioural issues and some ‘necessary and relevant’ risk aversion. But he said this could ‘backfire’ on the function, inviting suggestions that it did not know what it was doing, with the final position only becoming clear after the year finished.

Referring to the £1.8bn projected surplus in the recent quarter two figures, Mr Flory praised delegates for helping deliver a ‘fantastic turnaround in year’.

He rejected suggestions that the size of the surplus was a problem. ‘If there is a problem, it is less that we will have a collective underspend of 2%,’ he told the conference. ‘The problem is that it has come as a bit of a surprise.’ And he added that the surplus could create challenges in managing public expectations, particularly around funding for new drugs.

NHS chief executive David Nicholson said the projected surplus presented a ‘fantastic’ opportunity. ‘How many times have you said if you had a bit of headroom, what a difference you could make,’ he said. ‘Well, this is it, this is your opportunity.’

He added that the chance should not be wasted – the surplus should not be ‘frittered away’ but used to facilitate ‘real change’.

He reinforced the message from Mr Flory about improving forecasting and planning. ‘In the past, often it’s been done in a rudimentary way – we have to up our game,’ he told delegates.

Improving forecasting and planning was one of three challenges for the finance community identified by the NHS chief executive, alongside increasing productivity and clinical engagement. He accepted that the 3% cash-releasing efficiency saving demanded by the comprehensive spending review was a ‘big ask’, but said it was ‘well within our reach’.

However, he suggested that it would not be delivered by ‘cheese-paring bits from the system’ but needed transformational change. He called on finance directors to be ambitious and set 3% savings as an absolute minimum. ‘That might sound overambitious, but experience tells us ambition does get results,’ he said.

Mr Flory raised concerns about the paucity of applications for the service’s top finance jobs, both at a national and local level. He said too often short lists were too short. If this did not change, he predicted the service would struggle.

He accepted that the reasons were not completely clear, but might include a perception that there was a lack of support at the top level, insufficient development opportunities for middle managers or the health service’s own ‘tennis player syndrome’ – a realisation that people could ‘earn a good living without winning anything’.