The King’s Fund Report asks – Is the NHS in a Funding Crisis?

The NHS managed to withstand the financial pressure for the first three years of this parliament, but it is now under increasing strain. Many NHS organisations are reporting that they have ‘come to the end of the track’ in being able to reduce costs using traditional measures. Many large NHS organisations seen as financially stable and effective at managing their resources are now in deficit. Foundation trusts with financial reserves are able to draw on these to deal with deficits in the short term but by definition this is not a sustainable solution to the NHS’s funding problems.

The increasing number of providers in deficit is symptomatic of the mounting difficulties that trusts face in realising cost savings and assuring quality standards (through increasing nurse staffing, for example) in the wake of the Francis Inquiry. The government has found additional funding in 2014/15 – some new, most reallocated from within existing budgets – to support direct patient care. It has also announced plans to increase the frontline NHS budget by more than £3 billion in cash terms in 2015/16 with some of the increase earmarked for service transformation.

In the NHS five year forward view, NHS England argued that the NHS could deliver productivity improvements of £22 billion but would require £8 billion a year of additional funding by 2020/21. Most independent commentators suggest that delivering productivity improvements on the scale suggested will be a very tall order and that £8 billion is therefore the bare minimum that will be required. As yet it is unclear whether all three of the main political parties will commit to provide this level of funding.

While there is undoubtedly scope to deliver further productivity improvements, for example by tackling variations in performance between NHS providers, better procurement of goods and services, and greater integration of care, these will take time to deliver savings. Also, the NHS needs to be able to access funds to invest in new models of care before resources can be released from existing services. In the absence of an adequately resourced transformation fund, it will be extremely difficult to do more than prop up existing services in the short term.

The next government will inherit an NHS that faces growing pressures on all fronts. It will need to act quickly to ensure that there is sufficient funding to sustain as well as transform services in the next parliament. The NHS is working at or very close to its limits and patient care will suffer unless more resources are found.

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