NHS providers have reported colossal deficits. The scale of the cash crunch is unprecedented in the history of the health service, amounting to around £2.5bn. At the Institute for Public Policy Research (IPPR) we believe – along with many others in the policy community in healthcare – that this may be a significant understatement of the financial problems facing the service. Our assessment is that the true underlying position is a deficit as high as £3.5bn. Why do today’s figures show otherwise?
The biggest explanation for the discrepancy is capital spending. Every year, the Department of Health receives two streams of money for the health service, revenue (to pay for care delivered this year) and capital (to pay for investment in buildings and expensive equipment such as MRI scanners and so on). The Treasury imposes tight controls on this money to make sure that long-term investment is not sacrificed for short-term gain. Earlier this year, capital budgets were quietly devolved and the controls on them lifted, and nearly £1bn was transferred from the capital budget to the revenue budget.
Furthermore, there have been multiple cases of trusts selling existing assets to raise cash to cover their deficits. Money that is supposed to be invested to deliver care over many years is being diverted to try to make it through the year. There are, of course, times when buildings that are no longer clinically appropriate should be sold. The crucial point is that the receipts from those sales should be reinvested in new capital assets for the NHS, whether they are buildings or new technology to improve the efficiency of care delivery.
What these crisis-driven decisions mean is that the capital intensity of the NHS is falling rather than rising: the result will be that the health service will be less efficient in the future, reducing its long-run sustainability. All of this just to limp through the year – these are short-term fixes not long-term solutions. It is worth remembering that the settlement from the last spending round was relatively generous this year and next, with an almost total freeze in the two years that follow. It looks like it can only get worse.
Full story in The Guardian 20 May 2016