Cutting through 227 pages, 49 tables and seven annexes – Incisive Health Senior Counsel Richard Douglas has everything you need to know about the finances in DHSC’s annual report and accounts
It’s that time of year again. The sun’s shining, the school holidays are approaching, England are out of a major championship and a clutch of NHS financial reports and accounts appear to fill the now empty days.
What do they tell us this year? A few thoughts first on the overall Department of Health and Social Care (DHSC) position, then the NHS and then the provider sector.
First, the DHSC. The Department has managed within both the overall Revenue Budget (RDEL) which underspent by £692 million (0.6%) and the Capital Budget (CDEL) which underspent by £360 million (6.4%). The RDEL underspend was despite the fact that, in government accounting terms, the commissioner underspend of £1,013m (table 35) did not quite offset the provider overspend of £1,038m (table 37). It does, however, appear as though there was a breach on the narrower and historically critical measure of current expenditure (the non ring-fenced RDEL which excludes depreciation). And, remember there were also in-year additions to the RDEL of £335 million for the NHS, and a reserve claim for European Economic Area medical costs of £267 million.
Second, the NHS. Within the DHSC group, the NHS figures are close to those reported at quarter 4 so there were no significant problems during audit. The provider sector recorded a deficit (post-receipt of STF funding) of £986 million (£816 million in 2016-17) and the commissioning sector a surplus of £970 million (£902 million in 2016-17). Overall the NHS as a whole was broadly in balance – for pedants a very small deficit – and the numbers on both sides showed little change from last year.
There has been comment – often critical – about the imbalance between providers and commissioners, a deficit on one side and a surplus on the other for the last two years. Some perspective is needed here. These are very fine margins. Releasing the underspend to providers would not necessarily have improved their bottom line, unless it was on the final minute of the final day of the year. And the underspend will not all be in the right geographies. Essentially NHS England (NHSE) has been acting like the Department did in the past, holding a small reserve to protect delivery of the spending limit. This reserve is not built into the 2018-19 budget and – with the funding boost only due to kick in in 2019/20 – it will be interesting to see how this plays out.
The NHSE accounts show how the overall budget was spent across sectors and services. The clearest and most comprehensive information is in note 4 on operating expenditure; showing once again spend on the provider sector growing faster than overall expenditure, with a 4% increase in spending on Foundation and NHS Trusts compared with an increase in operational expenditure of 3.4%. Primary care expenditure also grew faster at 3.8% with other big areas such as dental services, pharmaceutical services, prescribing and ophthalmics broadly flat.
Finally, the provider sector, where we have a new kid on the block in the form of the Consolidated Provider Accounts that will provide endless hours of fun for commentators over the summer. This is the first time there has been a single set of accounts for the provider sector bringing together both Foundation Trusts and NHS Trusts.
These provide both useful summaries and a level of detail that I cannot do justice to in a short blog. But a few points to note:
- All of the deficit is in the acute sector, with all the other sectors in surplus. There has been a slight reduction in the number of deficit organisations to 101 and around £460 million is accounted for by five organisations. 94 providers needed cash support from DHSC
- Total income growth is lower than you would expect given the spend figures in the NHSE accounts – partly but not entirely explained by income other than from commissioners, but this sort of mismatch is not unusual in a group consolidation this large and complex. Acute services income increased by £1.6 billion or 2.8%, with this being almost entirely (£1.5 billion) for non-electives rather than more profitable elective work; mental health services income grew by 2.3% and specialist services by almost 10%;
- There was a 10% increase in capital expenditure from £3.1 to £3.4 billion. This investment was principally in land and buildings (with just 13% IT related) and represented around 150% of the annual depreciation charge. In crude terms at aggregate level capital stock is being more than replenished.
What does this tell us for this year? 2017-18 was the second year of broad “stabilisation” in the numbers, but there has not yet been an upswing – and there will be no cash injection for this year to clear the way: is the system now in place to move forward and start to improve its finances? Time will tell.