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Half-year deficit racked up by NHS providers hits £1.6bn

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NHS providers recorded a £1.6bn deficit for the first half of the financial year and were forecasting a £2.2bn deficit by the year end, regulators reported this morning.

The release by Monitor and the NHS Trust Development Authority is the first official confirmation by national bodies that the NHS provider sector is on course for a deficit north of £2bn for 2015-16.

It comes at an intensely sensitive moment, with system leaders reporting that negotiations over the health service’s settlement in next Wednesday’s government spending review were ongoing as of this morning.

However, the regulators suggested the year-end deficit could be brought down by a combination of capping agency spend, controls on management consultancy spend, and recent measures to reduce providers’ capital expenditure in 2015-16.

According to the report, the £1.6bn deficit reported for the first half of the year was £358m worse than planned, with 190 out of 241 providers now in the red.

Operational performance was also bleak. In July to September, the service missed the three month cancer waiting target, all three ambulance response time targets, and the four-hour emergency department waiting target – signs that bode badly for winter performance.

Breast cancer radiology

Breast cancer radiology

The health service missed the three month cancer waiting target in Q2

Monitor and the TDA, which will shortly merge to form a new body called NHS Improvement, highlighted agency costs and delayed transfers of care as two key drivers for the continuing decline in financial and operational performance.

Their report said: “Throughout the second quarter providers continued to face sustained pressure with waiting list sizes and emergency admissions continuing to rise, high levels of delayed discharges and urgent and emergency 999 calls increasing significantly compared to the same time last year.

“These pressures, coupled with high agency costs for the additional staffing necessary to meet that demand, continue to have a detrimental impact on the ability of many providers both to meet their constitutional standards and to manage their finances effectively, with deficit projections for the year-end continuing to grow above the amount planned at the beginning of the year.”

NHS providers spent £1.8bn on temporary staff in the first half of 2015-16, nearly double planned expenditure, and delayed discharges were estimated to have cost NHS providers £270m.

Despite the grim figures, the report expressed optimism that the deficit could be brought down below the £2.2bn forecast, as providers’ current forecasts did not “yet reflect any significant benefits from the measures we have introduced to control spending and improve efficiency”.

“If the government hopes to solve this financial crisis by capping agency spend, it will be disappointed”

Janet Davies

These measures include the imminent caps to be imposed on agency rates, financial plan reviews that providers were asked to carry out over the summer, controls on management consultancy costs, and moves to curb providers’ capital expenditure for the remainder of the year.

The report said: “The full benefit of some of these interventions will take time to realise. However, we expect them to deliver a full year finance performance that achieves, or gets close to, that which was planned at the beginning of the financial year with a further financial benefit from delaying capital expenditure.”

NHS Improvement chief executive Jim Mackey said: “Today’s figures make for really challenging reading – not least for those NHS organisations that are missing national standards and going into deficit for the very first time.

“NHS commissioners and local authorities need to work in partnership with local providers to help significantly improve how they tackle delayed transfers of care – a significant nationwide problem which is directly impacting on the amount of beds available to clinicians so that they can treat their patients in a timely manner,” he added.

“NHS commissioners and local authorities need to work in partnership with local providers to help significantly improve how they tackle delayed transfers of care”

Jim Mackey

Janet Davies, chief executive and general secretary of the Royal College of Nursing, said: “The NHS is staring into the financial abyss and while these reports reappear with startling frequency, precious little is being done about it.

“If the government hopes to solve this financial crisis by capping agency spend, it will be disappointed,” she said. “This crisis was not caused by agency staff.

“While it is right to reduce the money spent on short-term staffing, this should be done by increasing the supply of long-term staff, by training more nurses and paying them fairly,” said Ms Davies.

She added: “The government must give the NHS the money it needs now, and make it easier for trusts to provide safe staffing in a sustainable way in the long-term.”

But Saffron Cordery, director of policy and strategy at NHS Providers, which represents trusts, said: “The implementation of hourly price caps for all agency staff and a cap on management consultancy spend has the potential to be a key part of returning the NHS to financial balance.”

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