If I owe the bank £1000 and I can’t pay it back it’s my problem. If I owe the bank £100,000 and can’t pay it back, it’s the bank’s problem.
Similarly with the NHS, when there are a handful of trusts that are overspent the government can put the responsibility onto those trusts, pointing out that most trusts are in balance. When the vast majority of trusts are overspent and in significant debt it then becomes the government’s problem.
The most graphic of this is the Addenbrooke’s Hospital, which is seeking financial help from the Department of Health and Social Care as it is forecasting a deficit of almost £100m.
“The NHS does remarkably well considering how starved it has been of finances over the past few years”
When a hospital with a distinguished track record of clinical innovation is in deep financial trouble, this will be a millstone around the neck of the NHS as there is no way Addenbrookes is going to go to the wall.
NHS finance is extremely complex and there is many a director of finance, recruited from the private sector, who quickly finds that the root cause of so many of the problems is not poor financial management but, put very bluntly, that there is not enough money in the system.
I actually think that the NHS does remarkably well considering how starved it has been of finances over the past few years.
The government have woken up to this through a combination of adept pressure from NHS England’s chief executive, Simon Stevens, and many of the think tanks.
Pressure from their own backbench MPs is significant as they have been under pressure from their constituents who regularly bring difficulties to their attention. The prospect of not being re-elected focuses the mind.
The government have made much of the decision to allocate £20bn to the NHS. This equates to 3.4% per annum. The breakdown of this money is still not clear. How much is really new, how much rebadged?
Ministers are heralding a brave new era for the NHS, stating this money will provide the NHS with the resources that are needed to eradicate the longstanding problems that the NHS – and thus the public – are enduring.
I’ve got some sobering news for the government. The first call on this money will be to service the debt that trusts have accrued. Once this has been paid, the 3.4% will be reduced significantly. The level of debt repayment will of course differ from trust to trust depending on the size of their debt.
Trusts owing between £50m and a £100m are not uncommon. The remaining money will not be used to help modernise and develop new ways of working. It will help the NHS to stand still and stave off even more cuts in services.
There is a solution that will be unacceptable to the critics of the NHS but I believe is the most pragmatic and sensible approach.
Write off the debt. There’s something incongrouus about the government allocating the NHS money and then the same government immediately taking some of it back.
The net effect of writing off the debt on the national debt will be negligible, however the impact it will have on enabling the NHS to move forward, modernise and adopt new ways of working will be immense.
The Q1 figure published by the NHS in September puts the deficit as £4.3bn. Eye-watering you might think. However, when compared to the cost of the 2012 Olympics (£9bn) and the combined cost of the wars in Afghanistan and Iraq (£29bn), the NHS debt does not seem that excessive.
In addition, the underlying deficit of the NHS in England is £7.3bn as a result of loans received from the Department of Health and Social Care in recent years.
”My advice is to write off the combined debt of £11.6bn and then task the NHS to address the longstanding issues that bedevil the service”
My advice is to write off the combined debt of £11.6bn and then task the NHS to address the longstanding issues that bedevil the service – delayed discharges, lack of joined-up working with social care, A&Es unable to cope and cancelled operations to mention but a few.
I was interested to note that The Sunday Times in Scotland reported that the Scottish Government have written off the £150m of debt owed by their health boards. The same piece pointed out that NHS Tayside Helath Board has a debt of £45m and is also due to incur a further debt of £17m this year.
These problems are therefore not unique to the NHS in England, but are common throughout the four countries of the UK.
A failure to address the debt then. It is inevitable that within a few short years the NHS will be back again with the begging bowl and that in turn will give further encouragement to the critics of the NHS who say its unsustainable.
It is unsustainable if you do not invest in it. I can assure the public that a health service funded on an insurance basis will cost all of us significantly more than one funded from central taxation.
Peter Carter is an independent healthcare consultant and former chief executive of the Royal College of Nursing