The financial problems of the NHS are now “endemic” and have worsened so significantly in the past year that the situation is no longer sustainable, Whitehall’s official auditor has warned.
Two-thirds of health trusts in England are now in deficit, the National Audit Office has discovered, while their total debt has almost trebled since 2015 to £2.45bn. Auditors were particular alarmed by the decision to transfer £950m from the NHS’s budget for buildings and IT to pay staff’s wages.
MPs say the report amounts to one of the the most critical assessments of NHS finances by official auditors, as their reports usually err on the side of caution. The report will add to pressure on Theresa May and the chancellor, Philip Hammond, to set aside extra money in the autumn statement on Wednesday to plug the funding gap in the health service.
Meg Hillier, the chair of the public accounts committee, said the Department of Health was making “pie in the sky assumptions” about closing that gap.
She added: “I call on the prime minister to address [in the autumn statement] the realities of increasing deficits in NHS trusts, long-term workforce problems, unrealistic efficiency targets and the impact these financial stresses are having on the quality of services.”
Amyas Morse, head of the NAO, said: “With more than two-thirds of trusts in deficit in 2015-16 and an increasing number of clinical commissioning groups (CCGs) unable to keep their spending within budget, we repeat our view that financial problems are endemic and this is not sustainable.”
The NHS overall entered the current financial year with a “worse than expected starting point”, which could hamper plans to close the estimated £22bn gap between patients’ needs and resources by 2020/21, auditors said.
To close this gap, the Department of Health, NHS England and NHS Improvement estimate they can make £6.7bn of efficiency savings through measures including capping public sector pay and renegotiating contracts, the NAO reported.
The bodies estimate that trusts and CCGs can make a further £14.9bn of savings by “moderating the growth in demand for healthcare services” and by making 2% productivity and efficiency improvements.
Auditors examined these estimations and warned they had not been properly tested, which “raises concerns about whether planned savings can be achieved”.
The report highlighted the DoH’s decision in February to transfer £950m of its £4.6bn budget for capital projects, such as building works and IT, to revenue budgets which cover staff wages.
“The department did not assess the long-term effects of transferring this funding to cover day-to-day spending. This means it does not know what risks trusts may face in future as a result of addressing immediate funding needs,” it said.
The government’s five-year plan to increase the NHS budget by £8bn a year by 2020 was only set out last year, but hospital executives said this week that the money was not enough. Chris Hopson, of NHS Providers, said the settlement needed to be redrawn.
Commenting on the report, Prof Jane Dacre, president of the Royal College of Physicians, said not only was the NHS struggling to balance today’s books, but it was unable to invest in new plans.
“We need an NHS budget that meets the demand for health services now and in the future,” she said.
Jonathan Ashworth, the shadow health secretary, said the report was clear that the government’s “aggressive efficiency targets” had exacerbated NHS deficits.
“The government cannot turn away from the situation any longer. This cannot go on,” he said.
The Liberal Democrats’ health spokesman, Norman Lamb, said the report was a “nail in the coffin” for the government’s claims to be adequately funding the NHS.
“The National Audit Office seems to have no confidence whatsoever that the NHS can make the heroic savings the government is relying on. Crisis management has taken over from rational planning, while preventive care is being undermined,” he said.
A Department of Health spokesman said: “We know finances are challenging for some parts of the NHS, which is why we have a strong plan to get back on track.
We are already seeing progress, with 40 fewer trusts in deficit compared [with] this time last year.
“We are also investing an extra £4bn in the NHS this year to transform services and improve standards of care, which will rise to an extra £10bn per year by 2020/21.”
NHS financial problems endemic and no longer sustainable, say auditors
