NAO raps DH for ‘admin error’ that just kept NHS in black

The National Audit Office has given the Department of Health a firm rap over the knuckles for the way it managed to avoid spending more on the NHS than Parliament had voted for it.

In an unusual move, the nation’s financial watchdog issued a commentary on the DH’s annual report and accounts as they were published this morning.

It noted that although the department had managed to keep within the budget set by Parliament for revenue by £210 million and capital by £58 million, it had only managed to do so because it received more money than expected from National Insurance contributions.

“The department received an extra £417 million of receipts from the national Insurance Fund than originally anticipated. It did not notify HM Treasury of these extra receipts… [and without them] the department would have exceeded its [revenue budget],” the NAO says.

“The failure to follow well-established practice in relation to these National Insurance receipts has been ascribed by the department to an administrative error. HM Treasury has chosen not to impose fines on the department, due to the overspend against its budgetary controls.”

The watchdog notes that further, relatively extra-ordinary measures were taken to address the NHS’ financial position, in response to a £2.4 billion overspend in the acute sector. These including driving an underspend of £599 million out of NHS England and switching £950 million from capital to revenue budgets.

It also notes that these short-term measures are likely to have long-term consequences, since they suggest that “long-term investment plans have been set aside for the short term goal of meeting day to day spending.”

NHS England and NHS Improvement issued a financial ‘reset’ document this morning to try and get the NHS back on a more sustainable footing in the 2016-17 financial year.

These include putting a swathe of trusts and clinical commissioning groups into a new ‘intervention’ regime, agreeing financial and performance targets with all commissioners and providers, and demanding immediate action on staffing, back-office consolidation and pathology services re-organisation.

They also include making an explicit link between financial and target performance and access to the £1.8 billion Sustainability and Transformation Fund that NHS England has created with ‘frontloaded’ funds from last year’s spending review.

This would imply that any IT money to come out of the fund will only be accessible to trusts that can keep within their financial control targets while delivering on key waiting time targets.

However, NHS England has insisted that the NHS must regain financial control this year, if it is to be in a position to deliver on the ‘Five Year Forward View’ plan to deliver £22 billion of efficiency savings by 2020-21, to help close a projected funding gap of £30 billion.

Amyas Morse, head of the NAO, echoed the views of the health select committee when he said in a concluding statement this morning that the DH needed “to create an implement a robust, credible and comprehensive plan” to do this, and to move the NHS “to a more sustainable financial footing.”

But think-tanks expressed alarm about the accounts and the reset plans. The King’s Fund said the NHS was now “engulfed” in a serious financial crisis. Head of policy Richard Murray said the DH had only avoided breaching Parliamentary rules on a “technicality” and by using “short term measures” that “store up problems for the future.”

“It is no longer credible to argue that the NHS can continue to meet demand for services, deliver current standards of care, and stay within budget,” he argued. “If the government is serious about restoring financial balance, it must review its priorities with the NHS and be honest with the public about what it can do with the money allocated.”

Nigel Edwards, the chief executive of the Nuffield Trust said the reset would change things whether this honesty was forthcoming or not. “I fear that in order for hospitals to virtually eradicate their debts, as NHS England and NHS Improvement want, the next steps could be brutal service reductions and bed closures – which will shock an unprepared public,” he said.