Systems finish year with £534m combined overspend

Julian Kelly (pictured), NHS England chief financial officer, presented a paper to the NHS England board on Thursday showing the revenue position to the end of March. Overall the draft accounts position showed an overall underspend of £148m. Some £120m of this underspend related to ringfenced funding received for a range of programmes including the Covid-19 vaccination programme and the recently announced pay award.

Stripping this out left an underspend against core funding of £28m or 0.02% of total planned spending of £158.5bn. Within this overall underspend, Mr Kelly said that systems had overspent by ‘only £534m in aggregate’ in their first year of operation. This was ‘despite extreme financial pressures’ and represented just 0.4% of their allocation. He added that the overspend had been driven by operational pressures and, in particular, higher levels of Covid and sickness absence, as well as the ongoing impact of inflation.

Sixteen of the 42 systems overspent compared with their plans. This compares with 37 systems who began the year with plans to deliver a balanced budget. Five systems had started the year with deficit plans, aggregating a total of £100m. Mr Kelly reported that the majority of system deficits equated to less than 1% of total allocation.

The overspends in systems were balanced by underspends in specialised commissioning (£221m), other direct commissioning (£290m) and central costs (£256m). The underspend in central costs were due to the recruitment freeze as part of the merger and downsizing of NHS England, Health Education England and NHS Digital. The new organisation is expected to be 30%-40% smaller by the end of 2023/24 with a redundancy scheme in place in addition to the recruitment freeze.

The finance paper also reported that providers spent just over £7bn of capital – more than 99.4% of the full year budget – the same percentage of spend as in 2021/22.