What will George Osborne's £2billion NHS boost mean for Wiltshire - will it fill next year's budget gaps?

Written by Tony Millett.

The extra money for the NHS announced in the run-up to the Chancellor's Autumn Statement has received a broad welcome.  But to some observers and politicians it raises as many questions as it answers - and we have to try and discover how the money may help Wiltshire's pressured health services.  

Simon Stevens, head of NHS England, gave the announcement an especially enthusiatic welcome:  it very much supports the NHS model he has put forward in his NHS Five Year View Forward which relies on primary care moving to community based  services - something the Wiltshire Clinical Commission Group (CCG) has been promoting since it started work two years ago.

One unanswered question is about the source of part of the £2 billion:  £700m is coming from 'non-NHS funding in the existing Department of Health budget' - including £550m from the Department's "underspends".

One can only assume that this "underspent" money would normally have gone back to the Treasury - so there may be new pressure on the nation's overall deficit from this loss of Treasury 'income'.  But, with hospitals in financial trouble, waiting lists growing and a shortage of staff - what was the Department doing sitting on £550m of unspent money?  Answer came there none.

It is this £700m that will go straight to CCGs.  Wiltshire CCG share of the whole NHS budget for commissioners is 0.8 per cent.   Using this formula the CCG's budget for 2015-2016 should rise by a further £5.6m - at least.

It is not yet clear how much more of Osborne's promised sums will eventually devolve to CCGs - or how quickly it could take some of the pressures off commissioned services.

Wiltshire CCG's finance director, Simon Truelove, told Marlborough News Online:  "I welcome the additional investment into the NHS in line with the view presented by Simon Stevens."

"But I am worried - from a health and social care point of view - about the challenge local authorities have got to maintain their financial sustainability in face of an escalating care bill and increasing demand for care.  That is a real worry."

His point is well made.  One of the central problems with NHS finances at present on the CCG level is that millions of pounds are being transferred from their budgets to prop up local authorities for social care as their budgets are slashed by central government.  

One way to view the autumn statement money for the NHS is that it is 'guilt money' to make up for the crippling cuts to local authorities - cuts that are being replaced by the government in small but vital ways by increases to the NHS budget rather than by direct payments to local authorities.

We have arrived at a sort of robbing Hunt to pay Pickles contest.  And right in the middle of this contest is the Better Care Fund with its local plans overseen by Health and Wellbeing Boards - on many of which local authorities hold a majority of votes.

As MNO has reported, Wiltshire's Better Care Plan (BCP) has won plaudits from the government.  But the government's overall BCP policy has been fiercely criticised by MPs.

The chair of the Public Accounts Committee called the policy a 'shambles'.  The committee's report calculated that instead of the £1billion the government says the scheme will save the NHS in the first year, it was more likely to save just £314million. Even that is ambitious as it assumes the BCP will reduce the numbers of elderly ending up in hospital by three per cent in the first year.

BCP spending in Wiltshire for 2015-2016 is set at £29,297,000.  Of that sum £2.7m is coming from Wiltshire Council.  Many of the aims of the BCP are admirable.  But it only applies to 'the frail elderly', leaving less money for the CCG to spend on all other age groups in the county.  

The Wiltshire BCP budget for next year (the BCP's first full year) includes a £9,183,000 transfer from the CCG to Wiltshire Council to its protect social care work.  And a £2,240,000 contribution towards the Council's implementation of the new Care Act.

Risks and remedies
All three main acute hospitals that are used by Wiltshire people (Salisbury, Royal United in Bath and GWH) are in financial difficulty and either in the red or are closer to it than they would want. 80 per cent of England's hospital trusts are in deficit - a debt totalling around £714m.

Aware of hospitals' problems and with demand on A&E increasing even before winter approaches, the government have today (November 4) found another £300m to take the accident and emergency bailout fund up to £700m.  However, not all this money goes to the hospitals - in Wiltshire none of the first tranche went to GWH directly.

Before Osborne's 'Autumn money' was announced Wiltshire CCG was facing a 2015-2016 financial outlook fraught with difficulties, possible red ink and hard to achieve savings.

NHS finances are complex - very complex.  One needs a sophisticated adding machine and a pretty clear head.  

How many people know that if a patient returns to hospital within 30 days, hospitals pay the CCG's back for treatment?  And that can matter to CCG finances as 15-25 per cent of patients are re-admitted inside the 30 days.

It is complex, but we have to start somewhere. At month seven of the 2014-2015 financial year the CCG is in the red on its contracts (chiefly with those three acute hospitals) to the tune of £9.7m.  Of this amount the CCG has worked out that £8.7m will recur next year - because of the aging population, more expensive treatments and so on.

With the CCG likely to get (at a national 1.7 per cent uplift) an increase in funding for next year of £8.7m - that likely £8.7m increase in its spend with acute hospitals looks a bit grim.

When forecasting ahead to 2015-2016, the CCG then has to take into account a whole list of factors it can do little or nothing to circumvent.  There is, for example, the four per cent of efficiency savings all government departments have to make - and as the years go by these get harder and harder to achieve.

There is also a mandatory cut in the amount the CCG is allowed to spend on its running costs - down 10 per cent or £1.2m.

Each 0.25 per cent increase in national inflation costs the CCG £1.3m a year.  If the government suddenly decides its been too generous and cuts funding for next year by 0.25 per cent that would cost the CCG £1.2m.  

If Wiltshire CCG only gets that £5.6million from George Osborne's NHS autumn package, they will still be up against tight margins next year - and may have to bring into play contingency and headroom money.

And bizarrely, that £5.6million is almost exactly the sum the CCG will have to save next year as its annual 'surplus' - fixed at one per cent of its total allocation of funds.  Such are the 'dark arts' of NHS finances that this 'surplus' will go back to the Department of Health and will then be returned to the CCG the following year.  

But if they do not meet that 'surplus' target, they will only get back for 2016-2017 the amount they had saved - and the following year will still have to save the full one per cent of their new budget.  And that can be a downward spiral into debt of the sort that hit the predecessor to Wiltshire's Primary Care Trust and which the PCT managed to pay off just in time for the CCG to start work without a debt hanging round its neck.

Chancellor of the Exchequer's gifts rarely come without a nasty surprise at the bottom of the parcel.  This time it was George Osborne's certainty that he would, if re-elected, continue with public sector pay restraint in the next Parliament.  

How this will impact on vital NHS recruitment, let alone morale, remains to be seen. It will certainly be another NHS headache - if not directly for the CCGs, then for their service providers like the acute hospitals.

The full list of money - not all of it 'new money' - that the chancellor has announced for the NHS looks like this:
•    a £250m investment in improving out of hospital services, funded from fines paid by banks for exchange rate manipulation;
•    £700m of centrally held Department of Health and NHS England budgets that will be reallocated to NHS commissioners;
•    a £1bn increase in the baseline NHS budget; and
•    £1.115billion from exchange rate fines on banks will be spread over four years to improve GP and out of hospital services.  How much of that will filter down to CCGs is not yet known.