The NHS Settlement and Planning Guidance for 2016/17


Headlines for outsiders, reminders for insiders

Following the CSR settlement various strategy, guidance and allocation documents have been issued, setting the context and requirements for the NHS in 2016/17 and beyond.

The Government's mandate to NHS England 2016/17 (issued Dec 15)

Sustainability and Transformation Fund

NHS England's Summary paper on allocations (issued 8 Jan)

Delivering the NHS Forward View: Planning Guidance 2016/17 to 2020/21 (issued 17 Dec)

Supplementary technical planning guidance and templates (issued 18 Jan)

National tariff update and draft prices for 2016/17 (Monitor issued 11 Jan)

CCG allocations

Place-based allocation tables

Overall Position

The Five Year Forward View (5YFV) for the NHS covers the years 2015 to 2020, and forms the background to the announcements for 2016/17. This is the origin for the widely cited assessment that by 2020, £30bn real term pressures will occur, £22bn of savings are achievable, leaving the government to fill the remaining £8bn shortfall. The 5YFV flagged five requirements of the funding required which would make the plan deliverable:

Front-loaded investment in service transformation to support the new models of care vanguard projects, and investment in new technology

‘new asks’ for the NHS to be consistent with the phasing of the new investment (in other words, no un-funded cost pressures)

Continuing political support for the set of efficiency savings which will have to be made

Investment and funding protection for social care services

Make good on the public health opportunity.

Broadly, these commitments are delivered for the NHS and, in part, for social care. However, this comes at the cost of reductions in the funding of the parts of health which fall outside the NHS ring-fence, most notably Public Health where reductions may have knock-on effects on the NHS.

The Carrots and the Sticks

Providers will need to hit predetermined targets in order to access S&T funding, which will consist of achievement of milestones for deficit reduction, access, transformation.

Return to financial balance is a key expectation for 2016/17 with the guidance providing insights as to how this might be achieved:

Forensic examination of every pound spent and embedding a culture of relentless cost containment

Focus should be on cost reduction not income growth

Much greater consistency between financial plans and workforce plans

Increasing workforce productivity  – 1% improvement is equivalent to £400m savings across the NHS

Use of electronic rather than paper based rostering to improve staff efficiency

Compliance with agency staffing rules to reduce temporary staffing costs

Improving procurement through implementation of the Carter Review and achievement of organisational targets. Central reporting of expenditure on the top 100 most common items will aid national comparison and to ensure all organisations pay the best price

Better use of capital resources. Organisations urged to procure more effectively, consider different models, maximise disposals and extend asset lives where appropriate, whilst tighter capital resources suggest capital planning and management will need to improve.

Central changes will also contribute to easing the pressure:

- New guidance to be issued on changes to the capital regime and dividends calculations

- Single national purchasing and supply chain arrangement to be put in place for pass through high cost devices

- Potential is being explored for local health economy combined control totals (noting that this cannot affect the statutory financial position for NHSE, NHS improvement etc)

- Local pace-of-change policy can be implemented by mutual agreement, although it is hard to see this happening unless the existing expenditure can also be shared.

The requirements of commissioners are no less daunting, as to help ensure balance for NHS England they must:

- Plan to deliver a surplus of 1% (if not break even)

- Use new funds to improve position where a deficit exists rather than buy more services

- Plan to drawdown all cumulative surpluses in excess of 1% over the next 3 years

- Spend 1% of allocations non-recurrently

- Hold a 0.5% contingency reserve

- Providers will be incentivised to produce STP through access to S&T funding. Commissioners will only be able to access the real terms element of growth in 2017/18 following development and sign-off of a robust LHE strategic plan during 2016/17.

In addition there is a warning to those systems who can’t or won’t work together, that where collaborative and capable leaders can’t be found, NHS England and NHS Improvement will step in.

Summary of Key Messages

- 2015/16 outturn important – strong statement of the need to do everything possible to deliver overall balance for the health budget
- 2016/17 emphasis on planning, financial balance and CORE target delivery
- Allocations for CCG areas are ‘place based’ as specialist and primary care now included
- Allocation formulae updated with rurality and deprivation given more emphasis
- Development of effective system-wide plans is compulsory, footprint to be determined now and must be the main priority for 2016/17 (whilst keeping show on the road)
- Increased emphasis on inclusion of local authorities, particularly around prevention and social care
- System control totals, and locally determined pace-of-change can be considered
- Greater Manchester to receive its share of Sustainability and Transformation funding directly
- Carrots & sticks put in place to incentivise compliance – access to growth (CCGs) and sustainability & transformation monies (providers) determined by achievement of key milestones including effective system planning
- Very few changes to targets, emphasis on delivering those in place
- Lower emphasis and priority given to quality improvement
- Repeated statement of the need for forensic financial control and management.


There is a real change in the tone and emphasis of the documents compared with previous years. The direction of travel shows a good deal of pragmatic management sense, making it clearer what organisations must do.  It’s not surprising there’s an increase in central direction, although there is a certain degree of irony that this is judged necessary to make local co-operation happen.  

The move away from competition and back to collaboration is refreshing, as the memory of recent failures such as Hinchingbrooke and United Health don’t provide much confidence in the market providing a solution to the NHS funding crisis. The joint authorship and shared publication of the key documents demonstrates that regulators are working together, and through this attempting to reduce the complexities and confusions caused by the current statutory arrangements. The devil, however, is always in the detail, and we have yet to see substantive changes in the performance management and reporting arrangements, with examples such as the levying and use of fines still causing major management headaches as we come to the end of 2015/16.

There are a number of changes in the 2016/17 guidance which support local innovation and devolution: for those systems which are sufficiently advanced in their collaborations, the possibility of system-wide placed-based bottom line financial positions and the ability to determine pace-of-change locally provide opportunities to remove some of the existing barriers and frustrations. When viewed alongside the devolution of the sustainability and transformation funding element directly to Greater Manchester, can this be seen as a signal of greater autonomy for local areas in the future?