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NHS: deficit balloons

Worst financial crisis in a generation
Hajera Blagg, Monday, October 12th, 2015

The National Health Service’s deficit has ballooned to nearly £1bn in the first three months of the year, figures released on Friday (October 9) revealed – sparking what experts have called the worst financial crisis for the NHS in a generation.

Figures released by the health service’s financial regulator Monitor found that NHS Foundation Trusts in England overspent by £455m between January and March of this year, while NHS Trusts amassed a £485m deficit over the same period – totalling £930m.

It has been estimated that the deficit could reach £2bn by the end of the financial year.

Monitor pointed to the skyrocketing cost of agency staff as a main driver pushing the deficit out of control. Unite head of health Barrie Brown agreed.

“The use of agency staff is caused by a recruitment crisis, especially for nurses,” Brown said. “This has not been helped by low or non-existent pay awards in recent years which have contributed to a massive exit of staff; the ambulance service being a good example of staff leaving in large numbers.

“The steps already taken to curb the ballooning bill for agency staff needs to be accelerated,” he added. “There needs to be much better workforce planning.”

In June, the health secretary Jeremy Hunt announced measures that aim to rein in the agency staff bill, but Brown noted at the time that Hunt had failed to address the soaring bill’s root causes.

“As a supporter of the free market, does he not realise that the charges made by the agencies are an outcome of the market where supply and demand determine prices?” he asked.

Brown went on to say that under Hunt’s government, the nursing profession has been especially affected, making agency working a more desirable option for many nurses.

“Since 2010 there has been a drop in student nurses being trained and over the past five years nurses have had a real drop in income of 15 per cent – not surprising that they are tempted to work for agencies,” he said.

While the swelling NHS deficit rapidly accelerated in the last three months, it’s been steadily increasing from 2010, just as the Tory-led coalition government began its term.

The government inherited a surplus of nearly £2bn that year, which steadily dropped until NHS finances went into the red in 2013/2014. With the deficit now at almost £1bn, the health service’s finances dropped by a stunning 143 per cent over the past six years.

Brown argued that the health service’s financial woes were also the result of dangerous government underfunding.

Chickens coming home

“The financial chickens are coming home to roost big-time,” he said. “This is what happens when you have growing demand for NHS services and then decide to impose £20bn of so-called ‘efficiency savings’.

“Health secretary Jeremy Hunt needs to start banging the cabinet table to get more funds in real terms from the chancellor George Osborne, otherwise the NHS will go into a financial meltdown.”

Although the present Tory government pledged £8bn in extra funding for the NHS by 2020, it’s not clear when the health service can expect to benefit.

Paul Briddock of the Healthcare Financial Management Association noted that the extra funds are needed urgently.

“It has now been 188 days since the government vowed to inject £8bn of much-needed extra funding into the NHS and we still await confirmation as to where and when this investment will be made,” he said. “They now need to keep their promise and make their pledged investment a priority.

“This extra funding is critically important in order to help plug the severe decline in our healthcare finances, which is at unprecedented levels.”

But GP Charles West, who helped co-author a report detailing the costs of the NHS ‘pseudo-market’, noted that £8bn was nowhere near enough, and wouldn’t help much anyway if the government continued to impose a market structure on the NHS – an idea that was introduced in the 1990s and accelerated under the Health and Social Care Act of 2012.

“The pseudo-market imposed on the NHS has been reliably estimated to cost £20bn a year,” he said.


“Even if [chancellor] George Osborne comes up with the £8bn he has promised it will not solve the problem, it will simply pour more money into the hands of the private providers and management consultants who are gathering like vultures round a corpse.”

Brown highlighted one of the most damaging aspects of NHS marketization – private finance initiatives (PFIs), which called one of the “main culprits of the deficit” and is “dragging the trusts in England into eye-watering debt”.

PFIs fund public infrastructure projects with private capital. They have fronted cash to build many hospitals in the UK but their lifetime cost far exceeds how much private companies initially spend to build the hospitals, plunging trusts into debt.

An analysis conducted earlier this year found that the total PFI bill for this year will hit £2bn – amounting to nearly £4,000 every 60 seconds.

The PFI bill is enough to treat all cystic fibrosis patients for the next 20 years, and it would also be able to pay the wages for all qualified midwives for the next two and half years.

Against a backdrop of ever-increasing NHS debt, it was discovered last month that a senior NHS executive in charge of the NHS Trust Development Authority (TDA), David Flory, was handed down a £410,000 ‘golden handshake’ upon his retirement, in addition to his £235,000 salary.

It was a move that Barrie Brown called “a disgraceful reward for mediocre performance”.

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