NHS could experience funding crisis before General Election, new analysis reveals

The NHS is poorly placed to deal with continuing austerity and could experience a funding crisis before the 2015 General Election, new Nuffield Trust research reveals. On the same day, a new panel of 100 health and social care leaders raises concerns about the future sustainability of the NHS and social care.

The Nuffield Trust research, Into the Red?, is the most comprehensive look yet at how the finances of the hospitals and commissioning groups that make up the NHS in England have held up under austerity between 2010 and 2014.

Based on audited accounts, it finds that until last year the NHS was coping well with an unprecedented squeeze on funding due to increasing demand on the health service and the consequences of public sector austerity since 2010. But provisional data from the 2013/14 financial year shows that cracks are starting to show in a system under severe financial pressure.

The NHS has risen to the challenge of living within its means over the past three years. But it has now reached a tipping point Andy McKeon, Senior Policy Fellow and report co-author, Nuffield Trust

In the results of a major new panel of health and social care leaders published today by the Nuffield Trust, over two-thirds of professionals felt that NHS providers would have to go into deficit in order to provide a high quality service, and almost half consider that the NHS will no longer be free at the point of use in ten years’ time. Despite these concerns, a third said NHS care had improved over the past year.

Key findings from Into the Red? include:

• NHS and Foundation trusts as a whole were at least £100 million in the red in the last financial year – with 66 trusts in deficit in 2013/14. This compares to a surplus of £383 million in 2012/13 and 45 trusts in deficit in that year. Deficits were most concentrated in London and the Midlands, and were predominantly in the acute hospital sector.

• Commissioners found it harder to balance their budgets in 2013/14 than in previous years. Despite an overall underspend, 19 clinical commissioning groups (CCGs) ended the last financial year in deficit and NHS England projected a £377 million overspend on specialised services.

• Spending on agency staff has soared across the NHS. In 2012/13 the cost of temporary staff grew by 20 per cent. This trend continued into 2013/14 with Foundation Trust spending on contract and agency staff increasing by £300 million (27 per cent).

• There has been a marked shift from NHS to private and voluntary sector community health care provision. Spending on private community provision rose by a third between 2011/12 and 2012/13, but spending on private providers in acute hospitals has slowed.

With austerity set to continue, Into the Red? reveals worrying signs that the long-term resilience of the NHS is under significant strain:

• Despite Government requiring efficiency savings of four per cent across the NHS, both commissioners and hospital trusts are making smaller and smaller savings each year. In 2013/14 CCGs made savings of less than two per cent of their total spend, whilst Foundation Trusts saved three per cent compared with 3.4 per cent in 2012/13.

• Demand for hospital services is on the rise – emergency admissions, outpatient attendances and day case episodes have all been increasing. This meant that spending on hospital services grew by £1.1 billion in 2012/13, whilst spending on general practice fell by £10 million. Hospital spending increased further in 2013/14.

In the poll of 100 health and social care leaders, the first of four to be published by the Nuffield Trust in the run-up to the election, 70 per cent of respondents agreed that NHS providers will need to go into deficit in future in order to provide a high quality service if current levels of funding remain. Almost half (47 per cent) thought it was either very or quite unlikely that the NHS would remain free at the point of use in ten years’ time.

Andy McKeon, Senior Policy Fellow at the Nuffield Trust and report co-author said:

“The NHS has risen to the challenge of living within its means over the past three years. But it has now reached a tipping point. Our analysis shows just how poorly placed it is to cope with the squeeze still to come.

“Demand for NHS services shows no signs of abating. With hospital finances increasingly weak, growing pressures on staffing, and the goal of moving care out of hospitals and into the community proving elusive, the NHS is heading for a funding crisis this year or next.

“As our panel of health and social care leaders suggests, the immediate choice is rapidly becoming one of financial deficits or scrimping on the quality of care.

The Nuffield Trust analysis concludes that reforms to NHS services by adopting new technologies and promoting out-of-hospital care could help put it on a more sustainable financial footing in the future, but expecting this to happen in the next few years and without additional funding is unrealistic.

“Too many hopes have been pinned on achieving radical system change quickly. Such changes take time and their impact is uncertain.” Andy McKeon added.