ICB leaders have delivered a damning verdict on the state of their finances in a National Audit Office (NAO) report, published today.
A survey within the report found that 15 out of 19 ICB chief financial officers (CFOs) said the underlying financial position of their ICB had deteriorated in 2023/24, with seven of these saying it had deteriorated significantly.
The NAO NHS financial management and sustainability report 2024, which included case studies, interviews, and financial analysis alongside the survey, estimated there was £1.4bn aggregated deficit in 2023/24 across the 42 integrated care systems (ICSs), with three ICBs in NHS England’s Recovery Support Programme alongside 21 trusts.
On financial planning, ICB senior leaders said the annual planning process put pressure on ICBs to agree to ‘unrealistic’ plans, with only five CFOs saying the targets for 2023/24 were ‘realistic and achievable’ at the time they were set and 13 saying this was not the case.
ICB leaders also criticised the lateness of NHS spending decisions, which reduced their ability to spend new funding effectively, and that one-off funding was often based on national priorities which did not always meet local need.
The report authors said that NHS England aims to publish annual planning guidance as early as possible, allowing at least three months for systems to develop and submit budgets before the start of the year. However, this had not been achieved since 2017.
The report said: ‘ICBs were supposed to have more autonomy in determining how to allocate resources locally compared to predecessor NHS structures, including more freedom to shape future local health services.
‘There was general agreement that achieving service transformation was harder because of tight funding. But those we spoke to also said NHSE’s approach to planning and governance further reduced their real-world autonomy. NHSE considers the control that it exerts to be an unavoidable consequence of needing to deliver overall financial balance.’
The report had six recommendations (list below), including that NHS England should complete its annual planning processes with ICSs ‘well in advance’ of each financial year starting.
It also called on the Department of Health and Social Care (DHSC) and NHS England to ‘revisit their understanding’ of the reasons why some ICBs have persistent underlying weaknesses and struggle with their finances, and then develop a plan to remove these barriers.
It concluded: ‘The scale of challenge facing the NHS today and foreseeable in the years ahead is unprecedented. Following the statutory introduction of ICSs in 2022, we concluded that they needed time and capacity to build relationships and design services that could better meet local needs.
‘While some transformation is occurring, the pace of change has been slow as ICSs struggle to manage the day-to-day pressures of elective recovery following the pandemic, continual rising demand for NHS services, and significant workforce and productivity issues.’
It added that NHS systems have prioritised trying to ‘live within their allocated funding’.
‘Despite great in-year efforts to do so – some of which privilege the short term at the expense of the long term – an increasing number of NHS bodies have been unable to break even,’ it said.
‘When we consider how the health needs of the population look set to increase, we are concerned that the NHS may be working at the limits of a system which might break before it is again able to provide patients with care that meets standards for timeliness and accessibility.’
Systemic failures
In response to the report, Elaine Kelly, head of economics research at the Health Foundation, said it painted a picture of ‘systemic failures and inefficient decision making’.
‘The pressures on our fractured health service will only increase,’ she said. ‘Health Foundation research projects that the number of people with major illness is expected to increase by a third by 2040. Over the next parliament alone, our analysis shows a potential £38bn shortfall in funding to keep pace with demand and improve services.
‘There needs to be an honest conversation with the public about what can be delivered within existing budgets and where additional funding is needed – the review of NHS performance led by Lord Darzi can provides that opportunity.’
She added: ‘The NHS needs both investment and reform. A shift to the prevention of poor health and stable, long-term investment to meet underlying demand and cost pressures will strengthen the resilience of the NHS and help rebuild the health of the nation.’
Chief analyst at The King’s Fund, Siva Anandaciva, said the report showed the ‘desperate state’ of NHS finances.
‘For too long, financial planning in the NHS has been plagued by a lack of candour and transparency. Many local NHS organisations feel pressure to submit financial plans based on hope rather than reality,’ he said.
‘In his new role, the Secretary of State for Health and Social Care has talked about the need for honesty. The government can now decide if it wants NHS organisations to keep submitting overly optimistic financial plans, or the financial plans NHS leaders really believe they can achieve.’
Earlier this month, it was announced that an independent investigation led by Professor Lord Ara Darzi would look into the state of the NHS, results of which will be published in September.
NAO report recommendations:
- DHSC, NHSE and ICSs need to intensify their efforts to manage current and future demand for healthcare by preventing more serious ill health.
- As part of the next spending review, DHSC and NHSE should identify and explain to HM Treasury what further capital investments across government could have the greatest impact on NHS productivity and preventing serious ill health.
- NHSE needs to deliver on its commitments to increase NHS productivity.
- NHSE needs to complete its annual planning processes with ICSs well in advance of each financial year starting.
- NHSE and DHSC should revisit their understanding of the reasons some ICBs and other NHS bodies have persistent underlying weaknesses that lead them to struggle with their finances.
- To facilitate greater efforts at medium- and longer-term financial planning, DHSC and NHSE should propose to HM Treasury ways to deploy more health funding on a longer timeframe than annual allocation and planning cycles allow.
