Last Updated on January 23, 2018
A report from the National Audit Office has found that additional STP funding, aimed to help the NHS get on a financially sustainable footing, has instead been spent on coping with existing pressures.
The NHS received an additional £1.8bn Sustainability and Transformation Fund in 2016-17 to give it breathing space to set itself up to survive on significantly less funding growth from 2017-18 onwards. It was also intended to give it stability to improve performance and transform services, to achieve a sustainable health system.
The Fund has helped the NHS improve its financial position from a £1,848m deficit in 2015-16 to a £111m surplus in 2016-17. Within the overall position, the combined trust deficit reduced to £791m in 2016-17 from £2,447m in 2015-16. There has also been an improved underspend of £154m across clinical commissioning groups, yet 62 groups reported a cumulative deficit in 2016-17, up from 32 in 2015-16.
Missed targets
Despite its overall financial position improving, the NHS is struggling to manage increased activity and demand within its budget and has not met NHS access targets. Furthermore, measures it took to rebalance its finances have restricted money available for longer-term transformation. For example, the Department transferred £1.2bn of its £5.8bn budget for capital projects to fund the day-to-day activities of NHS bodies.
On top of this funding, many trusts are receiving large levels of in-year cash injections, most of which are loans from the Department, which have worsened rather than improved their financial performance. Extra cash support increased from £2.4bn in 2015-16 to £3.1bn in 2016-17.
Clinical commissioning groups and trusts are increasingly reliant on one-off measures to deliver savings, rather than recurrent savings that are realised each year. Between 2014-15 and 2016-17, the percentage of savings that were non-recurrent increased from 14% to 17% for commissioners, and from 14% to 22% for trusts. This poses a significant risk to the financial sustainability of the NHS in the future.
The NAO says that progress has been made in setting up 44 new partnership arrangements across health and local government, which are laying the foundations for a more strategic approach to meeting the demand for health services within the resources available. In reality, partnerships’ effectiveness varies and their tight financial positions make it difficult for them to shift focus from short-term day-to-day pressures to delivering transformation of services.
'Alarming report'
Responding to the report, Cllr Izzi Seccombe, Chairman of the Local Government Association’s Community Wellbeing Board, said, 'This alarming report shows that despite receiving £1.8bn in extra funding last year, the NHS is struggling to cope with the costs of increased demand and has not been able to make enough progress in the vital long-term transformation of services because it has had to spend most its extra money on current pressures.
'Prioritising funding for the NHS over social care will not help reduce pressures on hospitals. Instead of making costly short-term bailouts to treat the symptoms of pressures, money would be better invested in treating the causes of these pressures.
'Government needs to give urgent funding to councils to invest in prevention to reduce the need for people to be admitted to hospital in the first place, which will help to reduce costs to the public purse.
'It is clear that there cannot be a sustainable NHS without a sustainable social care system. Social care needs to be put on an equal footing with the NHS and government needs to use the upcoming final Local Government Finance Settlement to address immediate pressures and the £2.3bn funding gap facing social care by 2020.
'The NHS could learn a great deal from local government. While the NHS can operate a deficit budget, councils have a statutory duty to return a balanced budget each year and continue to do so. Councils are the most efficient part of the public sector, providing essential services people rely whilst balancing the books, despite significant funding pressures.
'This year’s winter health crisis and the way councils are successfully using extra social care funding from the Government this year to reduce delayed transfers of care – reducing delayed days by 20 per cent since July – should incentivise government to fully fund our social care system
'With the social care green paper months away, and subsequent legislation likely to take a long time before implementation, genuinely new money is urgently needed now to prevent social care breaching its tipping point.'
NAO recommendations
The NAO has made a number of recommendations to the Department, NHS England and NHS Improvement, which includes moving further and faster towards aligning nationwide incentives, regulation and processes, as well as reassessing how best to allocate the sustainability and transformation funding.