News / Mackey: tariff should help trusts back to balance

He was speaking as Monitor and the NHS Trust Development Authority (TDA) issued a report showing NHS providers faced continued financial and operational strain six months into the financial year. NHS Improvement will bring together Monitor and the TDA.

Providers in England – NHS trusts and foundation trusts – predicted a combined year-end deficit of £2.2bn. They recorded a half-year aggregate deficit of £1.6bn. This was £358m worse than planned at the start of the year, with 182 out of the 241 NHS providers reporting deficits.

The figures, released before the spending review, confirmed the NHS will receive a real-terms increase of £8bn over the next five years, with £3.8bn frontloaded for 2016/17. Monitor and NHS England are expected to publish details of the tariff, including the tariff efficiency factor, early in the new year.

Monitor and the TDA insisted measures now being implemented would improve operational and financial resilience. These included the new rules capping spending on agency staff; trusts’ reviews of their plans; controls on management consultancy spending; and reduced capital expenditure, where it is safe to do so.

The report said at Q2 the total capital expenditure of £1.4bn was about 36% less than planned, suggesting considerable scope for reducing capital expenditure.

It could take time for these measures to realise their full benefits, added the report. But trusts would be expected to deliver a year-end financial performance that achieved, or was close to, initial plans with a further benefit of delayed capital spending.

Mr Mackey said: ‘The new measures we are putting in place will mean providers have a better chance of improving their financial position throughout the remainder of this year. However, it is clear – especially as we see the majority of providers struggling with their financial situation – that the national tariff for next year will need to be set at a level that will create the conditions where NHS trusts and foundation trusts can begin to plan to bring themselves back into financial balance, which will enable them to focus on what matters to patients: improving care.’

While revenue was broadly on plan, the quarter two report said expenditure was 1.1% above plan. This was due to £1.9bn spent on agency staff in the first six months – the result of unplanned activity, inefficient use of permanent staff and recruitment difficulties.

Delayed discharges contributed to the adverse financial and operational performance. The Q2 report said they had cost providers £270m in the year to date and had affected performance in A&E in particular, where the four-hour waiting target was missed.

Agency spending affected planned cost savings. Pay cost savings make up almost 49% of planned cost improvement programmes and, though providers had delivered £1.1bn of efficiencies at Q2, this was £189m below plan – 62% was related to undelivered pay savings.

Commissioners are forecasting a small year-end overspend, according to an NHS England report on the financial position at month six. The report said the year-to-date position was a headline overspend of £29m (0.1%) and a forecast year-end overspend of £71m (also 0.1%). It is due to overspends at clinical commissioning groups and in specialised commissioning, including the cancer drugs fund. Nineteen CCGs forecast a year-end position worse than planned – three being unplanned deficits. Two CCGs with planned deficits said their position had deteriorated, while one improved to break even.

HFMA policy director Paul Briddock said: ‘With more than three-quarters of all providers in deficit, it is obvious it is a systemic problem that needs urgent attention. The NHS is simply not living within its means.’

King’s Fund policy director Richard Murray (above) said the provider figures show the NHS ‘in the grip of an unprecedented financial meltdown. Deficits on this scale cannot be attributed to mismanagement or inefficiency. Quite simply, it is no longer possible for the vast majority of NHS providers to maintain standards of care and also balance their budgets’.