An increasing number of NHS bodies have been unable to break even, according to a new report on the financial management and sustainability of the health service.
NHS England is facing challenges on an “unprecedented” scale, the National Audit Office (NAO) warned, with its sustainability hinging on how well it manages future demand.
Concerns have also been raised that the health service “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”.
The report is the ninth of its kind by the NAO, and the first to be published since February 2020.
Experts said its findings depict “a picture of systemic failures and inefficient decision-making”.
The report warned that NHS England’s financial position is “worsening” due to a “combination of long-standing and recent issues, including failure to invest in the estate, inflationary pressures, and the cost of post-pandemic recovery”.
According to the NAO, NHS England is expected to spend £153 billion in 2023/24.
It said “many NHS bodies failed to break even” during the period and in the previous 12 months, although the NHS calculates it underspent against its overall budget by about £30 million last year after additional cash from Government and reallocation of central funding.
The combined deficit of the 42 integrated care systems (ICSs) – which were introduced in 2022 to bring together the NHS, councils and voluntary sector to create services based on local needs – was £1.4 billion, the NAO said.
This deficit was initially planned to be £720 million for the year.
According to the report, NHS England received additional cash from the Government to manage pressures faced by its systems, including £1.7 billion to support pay deals for non-medical staff and £1.7 billion to mitigate the impact of strikes.
The NHS is still dealing with the pandemic’s legacy, including ongoing enhanced infection controls, operational and capacity constraints, and greater complexity in patient need
National Audit Office
The health service also reduced spending against its own central budget by £1.7 billion.
However, the NAO said “these actions did not prevent NHS systems’ deficits increasing beyond what was planned at the beginning of the year”.
The report added: “Significant funding for Covid-19 and large-scale pandemic-related activities have now ceased.
“However, the NHS is still dealing with the pandemic’s legacy, including ongoing enhanced infection controls, operational and capacity constraints, and greater complexity in patient need.
“For example, the NHS maintains a policy of leaving beds unoccupied if they are next to patients infected with Covid-19, reducing its efficiency.”
Inflation increased the cost of medicines and other items, it said, while the backlog of work needed to improve the NHS estate has also grown in recent years due to under-investment.
Getting the NHS back on its feet is our priority but it will take time
Department of Health and Social Care spokesman
The health service has also been spending more on agency staff due to strikes and workers being off sick.
In 2020/21, NHS England spent £2.4 billion – or 3.7% of the total wage bill – with agencies that supply temporary workers.
This increased to £3.5 billion or 4.5% of the wage bill in 2022/23, according to the NAO, and is estimated to be £3 billion or 3.8% of total staff costs in 2023/24.
Among the NAO’s recommendations is a call for the Department of Health and Social Care (DHSC), NHS England and ICSs to “intensify their efforts to manage current and future demand for healthcare by preventing more serious ill-health”.
It said there is scope for NHS England to “make better use” of its funds, but long-term sustainability depends on how the Government addresses the “steeply increasing demand for healthcare”.
NHS England’s spending on clinical prevention programmes increased significantly in 2023/24, to £156.6 million, according to the report, but the pandemic and the resultant increase in waiting times “has negatively affected the population’s health”.
It added that the country’s changing demographics “will continue to create significant additional demand for NHS services” and warned “people are living longer and spending more years in ill-health”.
Deep financial deficits have now spread widely across the NHS and are having a substantial impact on patients
Siva Anandaciva, King's Fund
The report also called on the DHSC and NHS to identify how investment made across Government would have the greatest impact on the health service’s productivity, as well as investigating why some ICSs and other NHS bodies struggle with finances.
The report comes after Health Secretary Wes Streeting called for a review into the state of the NHS.
A Department of Health and Social Care spokesman said: “The NHS is broken.
“Not only has this Government inherited the worst economic circumstances since the Second World War, but also an NHS in deficit.
“Getting the NHS back on its feet is our priority but it will take time.”
Elaine Kelly, head of economics research at the Health Foundation, said the NAO report “paints a picture of systemic failures and inefficient decision-making – including low spending growth, chronic under-investment in capital, and a culture of agreeing to unrealistic targets.
“For patients, this has contributed to longer waits and reduced satisfaction with the health service.”
Ms Kelly warned “pressures on our fractured health service will only increase”, with Health Foundation research projecting the number of people living with major illnesses is expected to jump by a third by 2040.
Despite trusts’ best efforts to deliver record levels of activity last year, NHS productivity has struggled to rebound to pre-pandemic levels
Saffron Cordery, NHS Providers
Siva Anandaciva, chief analyst at the King’s Fund think tank, said the report “should act as a warning to politicians of the tough decisions yet to come”.
“Deep financial deficits have now spread widely across the NHS and are having a substantial impact on patients,” he added.
Saffron Cordery, deputy chief executive at NHS Providers, said: “This report highlights the significant strain on NHS trusts as they continue to grapple with compounding financial pressures, including the cost of industrial action, inflation, workforce pressures and a deteriorating estate.
“Despite trusts’ best efforts to deliver record levels of activity last year, NHS productivity has struggled to rebound to pre-pandemic levels. Ever-rising demand for healthcare will also mount further pressure on the health service.
“In the face of these unprecedented financial challenges facing the NHS, trust leaders want and need to see greater emphasis on long-term investment.”
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