More staffing and patient care cuts likely unless government addresses growing NHS deficit

The government must use its autumn budget to tackle the NHS' mounting financial crisis or risk health leaders having to make further service and staffing cuts and there not being enough capacity in place to manage winter pressures.

The NHS Confederation is urging Chancellor to use her first budget on 30 October to plug the health service’s £2.2 billion deficit – a funding gap that is likely to widen when the extra unplanned costs of GP collective action (estimated to be £570m) and higher than planned pay rises are factored in.

This deficit comes while the health service continues to face record demand against a revenue settlement that was almost flat in real terms, meaning leaders are having to make tough choices about what services and staff they can afford.

NHS leaders need to see a chunk of any new funding provided immediately so that health systems can prepare for what will be another very difficult winter. This should include investment to boost staff and capacity in social care to support urgent and emergency care services.

In a new survey, nearly nine in 10 local health system leaders (87%) told the NHS Confederation they will not be able to meet their ambitions within their current budgets. Thirty-one out of England’s 42 integrated health systems have a deficit plan for the year.

Without additional funding NHS leaders fear they will face yet more impossible choices between balancing their books and cutting services and staffing posts, while not being able to secure the extra capacity they need to respond to patient demand this winter.

The NHS has had two of its most difficult winters on record following the pandemic. With the NHS facing very high levels of demand for care last winter, patients endured long ambulance handover delays, having to receive care in corridors and overflow wards, or being stuck in hospital despite being medically well enough to go home due to a lack of social and community care.

Matthew Taylor, chief executive of the NHS Confederation, warned that this winter will be a crucial first test for the government to make sure the NHS does not become overwhelmed.

He said: “We have welcomed the new government’s focus on improving health and care services and believe it shares the same long-term goals as NHS Leaders. We understand the very difficult economic circumstances they have inherited and the perilous state of the public finances.  

“But as winter looms and the NHS reports a growing financial black hole, the Chancellor needs to take urgent action ahead of the autumn budget to ensure NHS leaders are not forced into a position of having to cut more staff and patient care to balance their books.  

“We’re already looking at a £2.2bn deficit for the year but that was before the extra costs of GP collective action, the likely cost of settling the pay dispute with junior doctors and the extra costs of the latest pay awards for nurses and other agenda for change staff. The vast majority of these costs were either not planned or cost much more than was budgeted for at the start of the year.    

“With a revenue settlement for this year that was almost flat in real terms we have no doubt that had the Conservative Government been re-elected they would have had to inject more money ahead of winter, as they had to on several other occasions.

“Winter will be the first big test for the new government’s management of the health service. Far better for the government to get ahead of what’s inevitable by giving the NHS the funding certainty it needs going into winter so that posts can be saved and extra capacity be lined up. In the past, we have seen governments come to this conclusion and provide extra funding but too late in the year for it to have an impact. The new government must avoid that this year.

“As the NAO and others have said, the reality is that the NHS needs a financial reset ahead of the government’s new 10-year NHS strategy that will be published next spring. If the immediate funding crisis isn’t addressed, then we risk not only presiding over another damaging winter but also harming efforts to cut record waiting lists and making other long-term improvements such as shifting more care into the community.”

NHS England’s most recent financial performance update revealed that 31 out of 42 health systems have a deficit plan for the year, with a total planned overspend of £2.2 billion. This position will likely deteriorate due to the costs of GP collective action, with NHS England modelling estimating this to cost around £570 million.  

Questions also remain over where the additional funding to cover the recently confirmed pay rises for Agenda for Change (AfC) and junior doctors will come from, with the NHS only having budgeted for an extra 2% for AfC staff compared to the 5.5% that is being awarded and around 8% for junior doctors against an expected 22% deal.  

While the true financial impact of the NHS pay awards will not become clear until the autumn statement, these pay rises are expected to cost around £4.4 billion. We estimate the health service will have to find £1 billion of that - making a financial gap of at least £3.2 billion. If these cost pressures are not covered it will further exacerbate a very difficult financial position.

NHS leaders are also looking to next year’s Spending Review to place the NHS on a more sustainable footing, with Mr Taylor adding: 

“The government must move away from flat revenue growth for the NHS and give it the long-term financial security it needs to properly plan for winter each year without relying on last minute pots of cash. This is on top of the capital funding needed to repair crumbling estates, replace out of date equipment and invest in the latest digital technologies.

“But in the meantime, there is no doubt that the health and care sectors will need some kind of cash injection to get through the winter. Some of this must be used to support the smooth flow of patients from ambulances at the front door of the NHS right through to their discharge back home or into social care.”