Public Accounts Committee Raises Concern Over NHS Finances

The Public Accounts Committee’s latest report on the NHS criticises the government for not acting quickly enough to keep acute hospital trusts in financial balance.  Concluding that "there is not yet a convincing plan in place for closing the £22 billion efficiency gap and avoiding a 'black hole' in the NHS finances".

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The Committee found that the financial performance of NHS trusts and NHS foundation trusts has deteriorated sharply.  Their report highlights the "long-term damage" to trusts' finances caused by unrealistic government efficiency targets, and describes the data used to estimate trusts' potential cost savings targets as "seriously flawed".  It concludes the current system for paying providers "is not fit-for-purpose as it does not incentivize the right behaviours needed for joined-up healthcare services".

Trusts had a net deficit of £843 million in 2014–15, which is a severe decline from trusts' £91 million deficit in 2013–14, and £592 million surplus in 2012–13.  Trust finances look set to deteriorate further—halfway through 2015–16 three-quarters of trusts had a deficit, and their total overspend could rise to around £2.5 billion.

The Committee also raised concern over the approach of government to trusts' spending on agency staff—finding that while this spending has contributed to trusts' deficits, the Department of Health, NHS England and NHS Improvement "are only recently making serious attempts to control agency spending".

Its’ recommendations to government include ensuring "all trusts in deficit have realistic recovery plans by the start of the 2016–17 financial year that will lead to timely and sustainable improvements" and that "informed and realistic" efficiency targets are set for providers.  The committee concluded that as a matter of urgency, NHS England and NHS Improvement should "set out how they will support providers to secure the collective action that is needed to get value for money from the use of agency staff".

Meg Hillier MP, Chair of the PAC, said: "Acute hospital trusts are at crisis point.  Central government has done too little to support trusts facing financial problems with the result that overall deficits are growing at a truly alarming rate. Crude efficiency targets have made matters worse.

Without urgent action to put struggling trusts on a firmer financial footing there is further serious risk to services and the public purse. 

In particular it is unacceptable for senior government officials simply to point to excessive agency costs as a source of trusts' difficulties.  It is the job of those officials to take action to control spending on agency staff, and to address its underlying causes. The use of agencies is a sticking-plaster solution to deep-rooted problems with NHS workforce planning.

There is a long way to go before the taxpayer will be convinced there is a workable and properly costed plan in place to secure the future of our health service.” 

The committee has asked the Department of Health, NHS England and NHS Improvement to report back in September on the actions it is taking to implement the recommendations of the Audit Office’s report.