DH accounts reveal 'financial crisis engulfing NHS'

Accounts for 2015/16 released by the DH reveal the extent of the financial crisis engulfing the NHS, analysts have warned, as the government's financial watchdog said government plans to make the health service financially sustainable remain 'some way off'.

Details of the depth of the NHS financial crisis emerged just days after GPonline revealed landmark research demonstrating that systematic underfunding of general practice is among the primary causes of the health service's inability to operate within its budget.

Figures published by the DH in its annual accounts show an overspend of £149m against its net aggregate departmental expenditure limit set by the Treasury. The DH reported a £207m overspend against its £114.5bn revenue expenditure limit, counterbalanced by a £58m underspend against its capital expenditure limit.

The DH escaped severe censure for the breach because its coffers were swelled by national insurance contributions funding that was £417m higher than expected, bringing it back into an underspend.

However, health economists said the DH had escaped 'on a technicality', and the National Audit Office (NAO) put out a strongly worded statement that criticised the DH for failing to notify the Treasury about the extra national insurance funding it had received. The NAO said this failure to notify the Treasury was a clear 'failure to follow well-established practice'.

NHS financial targets

The watchdog added that if the Treasury had been informed, it or parliament may have chosen to strip the extra cash from the DH, leaving it in breach of its financial targets. The NAO report said the DH had ascribed its failure to inform the Treasury about the extra funding to 'an administrative error'.

Richard Murray, director of policy at The King’s Fund think tank, said: 'The news that the DH overspent its budget last year is further evidence of the serious financial crisis engulfing the NHS. Although the department avoided breaching controls set by parliament on a technicality, the strong rebuke issued by the NAO underlines the significance of this.

‘The overspend has happened despite additional funding from the Treasury, extensive raiding of capital budgets and the widespread use of one-off accounting measures. Many of the short-term fixes used this year cannot be repeated and taking money out of capital budgets is reducing much-needed investment in buildings and equipment, storing up problems for the future.

‘The prospects for the current financial year are grim, with national leaders already admitting that the NHS will be in deficit again despite even more stringent controls on spending.

NHS priorities

‘It is no longer credible to argue that the NHS can continue to meet demand for services, deliver current standards of care and stay within its budget. If the government is serious about restoring financial balance, it must review its priorities for the NHS and be honest with the public about what in can deliver with the money it has been allocated.’

NAO reports released on Thursday said the DH and its partners were 'still some way from implementing a plan to put the NHS’ finances in England on a sustainable footing'.

Amyas Morse, head of the NAO, said: 'The NHS in England remains under significant financial pressure which is demonstrated in its accounts. It has again used a range of short-term measures to manage its budgetary position but this is not a sustainable answer to the financial problems which it faces. The department and its partners need to create and implement a robust, credible and comprehensive plan to move the NHS to a more sustainable financial footing.'

The DH report on its accounts said that 2015/16 had been 'a challenging year for the NHS'.

It said: 'In financial terms, the NHS has faced significant pressures in meeting increased demand for services, and at the same time, labour cost – particularly labour headcount, has increased at a higher rate than the demand for services during the year. This has made it increasingly difficult for the department to stay within overall spending controls.'

Photo: iStock

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