NHS England could face £7bn budget shortfall next year, finance chief warns

Julian Kelly says potential sharp increase in funding gap due to Covid, bill for NHS staff pay rises and inflation in supply costs

GP services, cancer care and mental health treatment may face cuts because of an NHS budget shortfall of up to £7bn next year, the health service’s finance chief has said.

Waiting times could increase and overstretched A&E units could face even greater challenges in dealing with the surge in patients needing medical attention, he added.

Julian Kelly disclosed that NHS England may have to cover £6bn-£7bn of unexpected extra costs in 2023-24 due to continuing waves of Covid-19, meeting part of the bill for NHS staff pay rises, and inflation pushing up the cost of supplies.

The possible £7bn gap is a big increase on the estimated £4bn in extra costs the NHS is having to absorb this year for similar reasons. It sets up a potentially tense conversation about extra funding between NHS bosses and the Treasury, which has made it clear that all Whitehall departments will have to cover inflation-linked price increases from within existing resources.

In a presentation to the organisation’s board meeting, Kelly – the NHS’s chief financial officer – said the sum was in addition to the estimated £14bn in efficiency savings that it also has to make in the three years between this and 2024-25.

He pointed out that the NHS was facing a major shortfall because its budgets for this year and next were set when inflation was about 2% and its workforce’s pay increase was thought to be about the same. Nevertheless, inflation is now running at 10.1%, while staff have been given a 5% pay award, although the Department of Health and Social Care is only funding 3%.

Kelly said: “Remembering [that] we were funded on a 2% inflation, 2% pay settlement basis, we could see further cost pressures of about £6bn to £7bn in addition to the, let’s say, around £14bn we’re already thinking we might have to be consuming at that point.”

The NHS would have to completely revisit investment in other services if it has to meet the £7bn shortfall, Kelly said. As a result, he added, both it and the government were facing “some reasonably stringent choices about where investment can go and have been working out how we can do that whilst delivering the reduction in long waits [for elective surgery], the improvements in cancer performance and indeed how we deal with emergency pressures and how we improve access to primary care as well, and the investment in mental health and other issues”.

Matthew Taylor, the chief executive of the NHS Confederation, which represents hospitals and other care providers, said: “This is a sobering warning from NHS England. A financial hit of this magnitude will undoubtedly have a very real and hard impact on frontline patient care and needs to be urgently addressed.

“Patients will understandably be worried about what this will mean for their care and treatment, as are health leaders at a time when waiting lists are growing and there are 132,000 vacancies.”

Kelly said NHS England was already talking to ministers about its need for a budget increase to cover the extra costs, which also include providing Covid testing for staff.

A government spokesperson said the NHS was receiving record levels of funding. “Over the last two years, an extra £36bn was added to NHS budgets specifically to fund temporary impacts of Covid on the NHS, such as PPE, testing and infection control measures, meaning a like-for-like comparison to last year’s budget is not accurate.

“We recognise that public services are under pressure due to the global economic situation caused by the pandemic. The NHS resource budget in England is currently at £152bn and will increase to over £162bn in 2024-25 – the highest spend on health and care in any government’s history.

“The NHS is concentrating on new ways of working to increase efficiencies, save staff time, and ensure value for money. Our plan for patients sets out the next steps, including removing unnecessary bureaucracy to help improve access for patients and speeding up hospital discharge.”


Denis Campbell Health policy editor

The GuardianTramp

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