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Reports on Department of Health, NHS England and NHS Foundation Trusts’ consolidated accounts 2015-16

The Department of Health and its partners are still some way from implementing a plan to put the NHS’ finances in England on a sustainable footing, according to three reports issued by the Comptroller and Auditor General today. These concern the accounts of the Department of Health, NHS England and the Consolidated Accounts of the NHS foundation trusts.

The Department has kept within the voted budgets set by Parliament for revenue (RDEL) by £210 million and capital (CDEL) by £58 million. The Department’s budgets for 2015-16 were: £114.7 billion (RDEL), and £3.6 billion (CDEL). The margins by which the Department met its budgets were better than last year when RDEL was achieved by some £1.2 million, but these margins nevertheless remain wafer thin in the context of the NHS’ overall spending in England.

The Department received an extra £417 million of receipts from the National Insurance Fund, more than originally anticipated. The Department did not notify HM Treasury of these extra receipts that it received from HMRC. Therefore neither HM Treasury nor Parliament had the opportunity to consider whether to reduce any voted funding for the Department by an equal and opposite amount. Without these extra receipts, the Department would have exceeded its voted RDEL.  This meant that the Department exceeded its total budget by £207 million, but remained within its voted RDEL budget by £210 million.

The failure to follow well-established practice in relation to these National Insurance receipts has been ascribed by the Department to an administrative error. HM Treasury has chosen not to impose fines on the Department due to this overspend against its budgetary controls.

The Department took a range of actions to manage its position in 2015-16 and address the growing deficit in NHS providers.  While these are technically justifiable, they would not be at the core of a credible plan to secure the financial sustainability of the NHS in England.  Some of these measures could have long term consequences. The switching of £950 million from capital to revenue budgets means that long term investment plans have been set aside for the short term goal of meeting day to day spending.

Local NHS trusts ended the year with a combined deficit of £2.45 billion (foundation trusts with £1.1 billion and NHS trusts with £1.35 billion). Problems are not confined to non-foundation trusts and all providers are experiencing growing demand coupled with rising costs.

NHS England had an underspend of £599 million, which contributed to the Department’s position. However, the major contributions to this have been either non-recurrent or have been adjusted for in budget setting for 2016/17, to maximise funding available for front-line services and primary care transformation in a year of exceptional challenge for the NHS.

The Five Year Forward View estimated a £30 billion gap between resources and patient needs by 2020-21. In November 2015, the government committed to increasing funding for the NHS by £8.4 billion by 2020, with £3.8 billion of this given to the NHS in 2016-17.  This implies an efficiency target of some £22 billion, of which £15 billion is to be delivered by local organisations.

The Spending Review also allocated an additional £5.4 billion to the NHS in 2016-17, which included £1.8 billion of funding for sustainability and transformation. This is in addition to growth in normal tariff income and will, in part, address the level of in-year provider sector deficit inherited from 2015-16.

The Comptroller and Auditor General notes that, even with these additional resources in 2016-17, early forecasts are showing a year end deficit of £500 million in the provider sector. If that is the case then, with the extra £1.8 billion above, this sector would have effectively stood still in 2016-17. The Comptroller and Auditor General will look again at the financial sustainability of the NHS in England in a report in the autumn of 2016.

“The NHS in England remains under significant financial pressure which is demonstrated in its accounts. It has again used a range of short term measures to manage its budgetary position but this is not a sustainable answer to the financial problems which it faces. The Department and its partners need to create and implement a robust, credible and comprehensive plan to move the NHS to a more sustainable financial footing.”

Amyas Morse, head of the National Audit Office

Notes for Editors

1. The budgetary control regime under which the Department of Health works includes control totals for revenue and capital spending. These are authorised by Parliament through an annual vote (main estimate) and updated towards the end of each year through another vote (supplementary estimate), In addition to these Parliamentary controls HM Treasury also sets a budgetary control total in respect of total departmental spending.  The difference between the two controls is funding from the National Insurance Fund, which is not voted on by Parliament.  A breach of either the revenue or capital voted totals results in an ‘Excess Vote’ through which Parliament authorises the additional spend. A breach of the non-voted Treasury limit does not require Parliamentary authorisation but does have implications for how the Government overall is managing its budgets.

2. The Department’s spend against its total 2015-16 Resource Departmental Expenditure Limit (RDEL) was £114.7 billion and its Capital Departmental Expenditure Limit (CDEL) spend was £3.6 billion.

3. Press notices and reports are available from the date of publication on the NAO website. Hard copies can be obtained by using the relevant links on our website.

4. The National Audit Office scrutinises public spending for Parliament and is independent of government. The Comptroller and Auditor General (C&AG), Sir Amyas Morse KCB, is an Officer of the House of Commons and leads the NAO, which employs some 785 people. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether departments and the bodies they fund have used their resources efficiently, effectively, and with economy. Our studies evaluate the value for money of public spending, nationally and locally. Our recommendations and reports on good practice help government improve public services, and our work led to audited savings of £1.21 billion in 2015.

PN: 54/16