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No plan to avoid ‘black hole’ in NHS finances, says report

Government too slow to tackle ‘rip-off’ agency fees and deep rooted problems in NHS worforce planning

The government has no convincing plan for avoiding ‘a black hole’ in NHS finances with a £22 billion gap in funding to plug, according to a parliamentary spending watchdog.

The public accounts committee (PAC) criticised the government for failing to crack down on agency staff costs until recently, despite 'predictable' opportunities for agencies to exploit the NHS. It also called for thorough workforce planning to tackle staff shortages. 

The NHS is expected to find £22bn in efficiency savings by 2020-21, but cross-party MPs on the select committee remain unconvinced that such savings are possible. 

“There is not yet a convincing plan for closing the £22 billion efficiency gap and avoiding a ‘black hole’ in NHS finances,” said the committee.

Its report said that in England, acute trusts’ spending on temporary staff rose by 24% between 2012-13 and 2014-15, because of problems recruiting permanent staff and new requirements for safe staffing levels.

The committee said that almost £1 billion of deficit pressure in 2015-16 was attributable to temporary staff costs.

PAC chair Meg Hillier, said: ‘Acute hospital trusts are at crisis point. Central government has done too little to support trusts facing financial problems with the result that overall deficits are growing at a truly alarming rate. Crude efficiency targets have made matters worse. 

‘Without urgent action to put struggling trusts on a firmer financial footing there is further serious risk to services and the public purse.’

Ms Hillier said it was unacceptable for senior government officials to point to excessive agency costs as a source of the trusts’ difficulties. It was the job of those officials to take action to control spending on agency staff, and to address its underlying causes, she said.

‘The use of agencies is a sticking-plaster solution to deep-rooted problems with NHS workforce planning,’ she added.

NHS England told the committee that temporary staff costs were the largest driver behind trusts’ deficits. It said no one had foreseen the scale of agencies charging “rip-off” fees.

Last November, trusts in England were given a cap on agency staff costs – they are not allowed to pay more than 55% above the rate they would pay a permanent member of staff. 

Trust regulator NHS Improvement estimates that the predicted £4 billion expenditure by trusts on agency staff in 2015-16 could be £880 million lower if there were no excessive agency charges.

But the committee stated that the root cause was the volume of temporary staff required not the agencies’ commission. It called for a holistic solution including affordable homes for NHS staff.

It also recommended that all trusts in deficit have realistic recovery plans by April 2017 and that the government set ‘informed and realistic’ efficiency targets for providers.   

An NHS England spokesperson said: ‘We agree with most – but not all – of the points made in this report. It correctly notes both that the NHS is, by historical standards, facing a very substantial funding slowdown, but also that it still has genuine opportunities for improved efficiency.’

A Department of Health spokesperson said: ‘We’re committed to the NHS and are investing £10 billion so it can implement its own plan for the future – including an extra £4 billion next year to help the NHS respond to the growing demand on services.

‘We are intensively supporting challenged trusts to improve finances, while clamping down on rip-off staffing agencies and helping hospitals become more efficient by sharing best practice across the service.’

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