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Any complex financial planning process involves a bit of pushing and pulling between where you hope to get to and what you can actually achieve. Targets are necessary to concentrate the minds of those searching for solutions. But you also need to check back on what’s actually practicable so that you don’t end up with commitments which simply can’t be delivered and undermine the credibility of the plan. That goes double when the financial circumstances are particularly challenging.
Just such a push and pull is regularly played in health and local government. For example, for councils politicians will want to keep favoured services in place at a time of falling funding, but without raising council tax. Treasurers, in their ‘section 151’ role, are used to that tension. Yes, they will do all they can to make the sums work for the politicians, but ultimately – and statutorily – treasurers must ensure that the budget is balanced in spirit as well as in name. They are on well-understood ground if they have to take a stand against a lack of realism from their political masters.
The NHS certainly faces challenging financial circumstances. The Five Year Forward View (FYFV) called for savings of £22bn by 2020 on a budget of £120bn. Moreover, CIPFA’s view is that given the extra commitments taken on since the FYFV was published savings of at least £30bn will actually be needed to keep finances on track without impacting negatively on services.
Step forward sustainability and transformation plans (STPs) as the mechanism chosen to turn those top-down intentions into concretely deliverable local actions. Integrating services across health and social care is a no-brainer for patients, families and stretched NHS teams seeking improved efficiency. STPs offer a promising start in setting up the governance to make that integration happen. Yet huge pressure is on clinical commissioning groups (CCGs), together with their local partners across the whole health and care sector, to deliver not just the vision and the plans, but to achieve the bottom line - and fast. CIPFA’s assessment of the plans – as set out in Reality Check: Next steps in developing sustainability and transformation plans (PDF, 390 KB) – is that they will struggle to do so. Yes, the savings plan add up to the amounts required, but they do not, in general, inspire confidence that they will be achieved.
Our review of the 44 drafts suggests there is still much to be done, particularly in developing full scenario planning and understanding risk. Transparency and realism is crucial, even if it does expose the difficulties involved in achieving the plans. Otherwise there is a danger that the desire to present a positive position to regulators will lead to unrealistic judgements being made.
To this end, CIPFA is of course keen to support finance leaders, from both the NHS and local government involved in the preparation of STPs. CIPFA would expect them to be closely involved in finalising the draft STPs to ensure that they represent a realistic assessment of the financial position. Achieving the difficult balance between pushing hard for efficiency improvements whilst at the same time ensuring realism will need finance-leaders to assess the achievability of savings plans, calling for evidence as necessary to gain the appropriate assurance. They should apply quantified sensitivity analysis, build appropriate contingencies into budget projections (so that there is a fallback if plans go awry) and ensure that a realistic assessment is made of the upfront investment needed to achieve change. And it will involve speaking truth to power.
The finance professional also needs to think outside of the established comforts of organisational control – making assessments on a whole system basis and working across current organisational boundaries to advise on and help develop payment systems that incentivise prevention more than the present tariff system does. None of that will be easy, but the finance role is critical if STPs are to turn the opportunities of partnership into transformed working and ultimately better financial control over the health and care system as a whole.