NHS Faces Unprecedented Financial Crisis with £7bn Overspend Predicted
The NHS is facing an unprecedented financial crisis and is projected to exceed its budget by at least £7bn next year, due to inflation and strikes causing hospital trusts to accumulate alarming levels of debt, according to leading independent experts. The issue of skyrocketing deficits is affecting an increasing number of trusts across England, just ahead of a likely general election within the next 12 months. This situation raises serious doubts about Rishi Sunak’s ability to fulfill his promise of reducing record waiting lists.
To address the extreme pressures, the Manchester Integrated Care System, which brings together trusts and other healthcare providers in Greater Manchester, has enlisted the help of Stephen Hay, a troubleshooter from PricewaterhouseCoopers who previously worked in the NHS, to tackle its dire financial position. NHS Greater Manchester has reported a deficit of £125m after the first four months of the 2023-24 fiscal year, which is over £100m worse than planned.
Insiders anticipate that the dire state of trusts’ finances will be a major topic of discussion at a meeting of NHS England’s board on 5 October. While inflation and strike costs have exacerbated the situation, the descent into debt can also be attributed to years of pre-Covid austerity measures. This comes as ministers attempt to recoup additional funds that were injected during the pandemic to address the emergency situation.
Sally Gainsbury, a senior policy analyst at the Nuffield Trust, one of the leading authorities on NHS finance, stated that the English NHS is facing an almost impossible challenge to balance its books and cover the costs of care this fiscal year, due to the government’s desire to reduce its budget back to pre-Covid levels. Official figures suggest that the service was already on track to exceed its budget by around £2bn by the end of May. This figure is expected to worsen throughout the rest of the year as the cost of covering striking doctors at premium rates increases. Additionally, the NHS as a whole is currently facing a budget for next year that is £7bn smaller than its current rate of spending.
In another blow to the NHS, this week will witness the first joint strike by junior doctors and consultants, resulting in additional costs from employing agency workers to provide cover and the loss of income from cancelled operations. Consultants in England will strike on Tuesday and Wednesday, with emergency services continuing but elective surgery being affected. Junior doctors will join the strike on Wednesday.
Siva Anandaciva, chief analyst at the King’s Fund, expressed deep concern over how quickly the financial position of NHS providers is deteriorating. Financial deficits in the NHS have tangible consequences for the care received, as increased pressures force providers to make decisions such as leaving staffing vacancies unfilled or cutting back on plans to improve service delivery. Anandaciva further warned that the situation is likely to worsen in the next fiscal year, as the number of people requiring care continues to rise while funding growth slows down. He also stated that it is hard to believe that, in an election year, the NHS will be allowed to suffer such severe financial difficulties.
Much of the funding pressure stems from the estimated £3.9bn cost of the recent 5.5% average pay rises awarded to NHS staff. The Department of Health and Social Care was only partially funded by the Treasury for this increase, meaning that budget cuts may have to be implemented or additional funding requested.
Saffron Cordery, deputy chief executive of NHS Providers, emphasized the importance of ending the strikes soon to prevent further damage. She warned that industrial action must not become the norm, as it downplays the impact on patients and staff and masks the severity of the mounting financial challenges facing the NHS.
Julian Kelly, the deputy chief executive and finance chief of NHS England, has repeatedly issued public warnings about the bleak financial outlook for the service this year and in the following fiscal year. He has stated that planned funding for key areas of care may have to be cut as a result. Kelly has attributed the dire situation to high inflation wreaking havoc on NHS financial planning.
NHS England has also agreed to make unprecedented efficiency savings in exchange for budget increases from the Treasury. Last year, the Institute for Fiscal Studies revealed that the NHS was facing small real-terms budget cuts in the next two fiscal years, partly due to inflation and partly because the current funding settlement was front-loaded to provide more money early on to help the NHS cope with the burdens imposed by the pandemic. The thinktank pointed out that if these cuts were implemented, it would be the first time since the early 1950s that the NHS faced two consecutive years of real-terms cuts to its income.
Last week, the government pledged an additional £200m to address winter pressures, although NHS sources stated that it would be used to cover the costs of agency and other staff during the strikes.
A spokesperson for the Department of Health and Social Care emphasized that the NHS is being supported with record funding, with the core NHS budget in England currently at £163bn and set to increase to almost £166bn next year, representing the highest spending on health and care in any government’s history. The spokesperson also mentioned that cash support is provided to trusts in financial difficulty to ensure the continuity of patient services. Trusts also work with NHS England to address underlying issues, improve performance, and manage their budgets. In cases of financial difficulty, NHS England can deploy the national recovery support program to provide intensive assistance.
