NHS sustainability, barriers to integration and the social care question


by Dr Eleanor Roy, CIPFA policy manager health and social care

The NAO’s report on NHS financial sustainability echoed concerns we have previously raised in relation to the overall financial position of the NHS; the barriers to integration presented by funding flows; and the absence of a long-term financial settlement for social care.

Previous NAO reports on NHS finances have concluded that financial problems in the NHS are endemic, and that additional in-year funding has been used to meet current pressures rather than address financial sustainability. The NAO’s latest report did nothing to change this view and concluded that the overall picture for the 2017/18 year does not ‘add up to a picture that we can describe as sustainable’.

Looking at the figures for 2017/18, this is unsurprising. The overall position for NHS Commissioners and Trusts was a combined deficit of £21m. However, this represents a very mixed picture with trusts and CCGs reporting combined deficits of £991m and £213m respectively, and this being offset by a £1.2bn underspend on central functions by NHS England. This raises the obvious question: is the money reaching the right parts of the system in the first place?

The overall figures also hide variation within the system. The combined trust deficit appears to be mainly due to a small number of trusts and an increasing number of CCGs reporting deficit positions. In the provider sector it appears that the financial special measures programmes has improved the situation to some extent, but the worst-performing trusts are continuing to deteriorate. The reliance on short-term solutions—such as one-off savings, sustainability and transformation funds, emergency loans and the transfer of capital to revenue—may help in a given year but may store up issues for the future.  

The long-term plan sets out the aim to improve the financial position so that no NHS organisation is reporting a deficit by 2023/24. However, given the underlying issues reported by the NAO and the lack of detail in the plan as to how this is to be approached, it seems unlikely that these proposals alone will realistically improve the overall financial sustainability and resilience of the NHS in the long term. A whole-system approach needs to be taken which addresses the underlying problems in particular areas, as it is now urgently needed.

One key issue from our perspective is how funding flows. We have to wholeheartedly endorse the NAO recommendation that ‘national bodies need to identify the behaviours they want to encourage in local bodies and ensure that the payment system and other incentives encourage these behaviours’. While the long-term plan signals a move towards removing some of these barriers, with some encouraging commitments to changing funding flows and contract arrangements, these again lack detail. Clues to the direction of travel can be found in the consultation on the national tariff payment system for 2019/20, and, as the saying goes, “money talks”. The way funds are distributed, and the associated objectives, drive the behaviour of individuals and organisations within the system.

The NAO report also points out the obvious omissions from the long-term plan in that key areas of spending are not covered by the funding settlement. Capital investment, public health and workforce issues are all awaiting clarity from the spending review, but are likely to have an impact on the ability to deliver on the long-term plan. 

The glaring omission is the lack of a long-term funding solution for social care, which is particularly concerning, with the plan itself based around the assumption that social care will not impose any pressure on the NHS over the next five years. With the LGA estimating a £3.6bn shortfall in social care funding by 2025, this seems a tall order. The NAO report stated that local NHS bodies themselves are concerned that without a long-term funding settlement for social care, it will be ‘very difficult to make the NHS sustainable’.

While a Green Paper has been promised ‘by April’, it needs to be realised a Green Paper is not a solution. Likely, it will present some ideas, which, if any of them are deemed acceptable, will take time to put into practice. Indeed, if normal process ensues, then a White Paper would follow and legislation may be required. While I’m a great believer in consultation and due process, we have to recognise we could be out the other end of the NHS five-year settlement before a potential solution to the social care question is implemented. Also, we have been here before – do the names Sutherland, Wanless, Dilnot and Barker ring any bells?

At an event last week I heard a senior official from DHSC discuss the forthcoming Green Paper, the need for funding reform to address unfairness in the social care system and the underlying issue of baseline funding. When pressed on the point of how long a solution would take to implement and how this sits with the assumption of ‘no additional pressure’ in the long-term plan, we were reassured that there was a commitment to provide adequate funding for social care, so the no additional pressure assumption was met. Does this signal a further short-termist approach to provide funding injections rather than a long-term sustainable solution? Also, I wonder if Treasury agrees to this additional funding – and how the ‘no additional pressure’ commitment will be translated into a funding allocation? As usual, we have more questions than answers.

This article first appeared in Public Finance Magazine.

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