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DHSC gets £600m bailout to avoid budget breach

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The Department of Health and Social Care has received an additional £600m from the Treasury to cover “unforeseen” cost pressures in 2018-19.

Experts said the budget increase is likely to have been sanctioned to help the department avoid a breach of its spending limit, Heath Service Journal reports. The financial position of every NHS organisation feeds into the DHSC accounts.

The pattern of financial deterioration in previous years suggests there will be a provider deficit of between £500m and £1bn, and NHS England has suggested its ability to report large surpluses to offset provider deficits has been exhausted.

The increase is revealed in supplementary spending estimates published by the Treasury, which describe the money as “reserve funding to cover unforeseen one-off in year pressures”.

Sally Gainsbury, senior policy analyst at the Nuffield Trust think tank, said: “This looks like the Treasury have allowed the department to draw on reserves to bailout what would otherwise be a breach of its spending limit.

“Our projections suggest there’s going to be a reported NHS provider deficit of around £800m this financial year, which NHS England is going to struggle to fully offset.

“It’s not clear if the Treasury would usually contemplate additional in-year funding to cover a provider-side deficit, but the DHSC will have been able to point to other one-off costs such as Brexit and generic drug prices which have added to its pressures for this year.

“But the bottom line is the department has been heading for a problem in the accounts which it looks like this is designed to fill.”

The reserve fund is set aside by the Treasury to cover unforeseen costs that departments cannot accommodate within their existing budgets, and departments must make formal requests to get access to it.

The DHSC was contacted for comment.

If a department overspends its annual budget then it normally triggers an embarrassing and significant parliamentary process, in which a vote is required to sanction the extra resources.

The Department of Health narrowly avoided a breach in 2014-15 after it was given an additional £250m by the Treasury. The DH did overspend the following year, but a technicality meant it avoided a formal Parliamentary process.

Last year, the budget was also increased by around £600m, although this was tagged specifically to cover increases in clinical negligence premiums and spending on reciprocal healthcare arrangements with European countries.

Miriam Deakin, director of policy and strategy at NHS Providers, said: “The £600m reserve funding set aside is a significant portion of funding. We need more clarity from the department and NHS England about how this will be used. 

“Trusts have been working flat out this year, but we have known for sometime it is going to be difficult for the sector to deliver its planned position at year-end.”

The supplementary spending estimates also confirm that £500m will be transferred from the department’s capital budget to the revenue account, as previously reported.

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Readers' comments (1)

  • Looking forward to in year funding of even half that scale to reduce the amount councils are having to draw on reserves to keep the wolf from the door.....just shows why the NHS cannot be relied upon to manage its finances when a Treasury bailout is just around the corner.

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