How far into the red will the NHS sink?

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Call it overspending, underfunding or deficits, the latest news from NHS Improvement involves plenty of red ink on the books of hospitals and other trusts.

And the picture is worse than it looked last November, which will lead to speculation that NHS finances in England are close to being out of control.

As recently as November, Jim Mackey, head of the regulator NHS Improvement, was saying that trusts in England would run up a total deficit of £580m for the full financial year.

Now that has been revised up to a range of £750m to £850m. That will hardly win him many friends at the Department of Health where ministers are anxious to demonstrate that a tighter grip has been applied to the NHS purse strings.

So what's changed?

NHS Improvement is pointing the finger at higher than expected patient demand, with emergency hospital admissions 3.5% higher in the final three months of 2016 compared to the same period in 2015. The regulator had anticipated an increase of more like 2%.


Social care problems are also being blamed. NHS Improvement says there was a 28% jump in the number of "bed days" lost because of problems discharging medically fit patients, who had to be kept in hospital when they were medically fit to leave. Difficulties finding the right community or social care were cited as reasons for that increase.

Rising numbers of non-urgent operations and procedures were cancelled because of bed shortages. That hit hospital finances as trusts lost the flow of income they would normally have received for carrying out the operations.

It's easy to see why NHS England leaders and hospital chiefs have been calling for urgent action on social care. A delayed transfer is bad news for the patient stuck in the hospital bed, frustrating for the patient who has an operation postponed, and a real headache for hospital finance directors who lose income.

NHS Improvement argues that more cost controls have been applied, resulting in a 24% lower bill for agency staff in December compared to 12 months earlier.

Paul Briddock, of the Healthcare Financial Management Association, said staff had done a "remarkable job in trying to keep services going while also delivering over £2bn of efficiencies".

A deficit overshoot of a few hundred million pounds should of course been seen in the context of total trust revenue of nearly £80bn and annual NHS spending in England of more than £100bn.

To get to the real picture, though, you need to take into account the £1.8bn "sustainability fund" run by NHS Improvement. This, in effect, is financial support for trusts who follow the regulator's plans for cost reduction. Add that to the possible year end deficit of £850m, as already stated, and you get to a total overspend of around £2.6bn which would be higher than last year.

A year ago we reported the pressure being exerted from on high on trusts to ensure they did not end the year too far into the red. The Department of Health has to ensure that trust deficits are covered by surpluses elsewhere so it does not overspend the budget agreed by Parliament. The process went to the wire last year and seems set to do so again.

Remember this was supposed to be the "year of plenty" for NHS funding with annual increases tailing off in future years.

The fact that trusts are struggling now is alarming.

The government will argue the NHS could be more efficient and make better use of its resources. Critics will say the service in England is underfunded.

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