The audit watchdog says the NHS received an additional £1.8n ‘sustainability and transformation fund’ in 2016-17 to give it breathing space to set itself up to survive on significantly less funding growth from 2017-18 onwards. It was also intended to give it stability to improve performance and transform services, to achieve a sustainable health system.

The NAO reports the fund has helped the NHS improve its financial position from a £1,848m deficit in 2015-16 to a £111m surplus in 2016-17.

Within the overall position, the combined trust deficit reduced to £791m in 2016-17 from £2,447m in 2015-16. There has also been an improved underspend of £154m across clinical commissioning groups, but 62 groups reported a cumulative deficit in 2016-17, up from 32 in 2015-16.

Despite its overall financial position improving, the NHS is struggling to manage increased activity and demand within its budget and has not met NHS access targets.

Furthermore, the NAO says the measures it took to rebalance its finances have restricted money available for longer-term transformation, which is essential for the NHS to meet demand, drive efficiencies and improve the service. For example, the Department of Health (DoH) transferred £1.2bn of its £5.8bn budget for capital projects to fund the day-to-day activities of NHS bodies.

On top of this funding, many trusts are receiving large levels of in-year cash injections, most of which are loans from the DoH, which have worsened rather than improved their financial performance. Extra cash support increased from £2.4bn in 2015-16 to £3.1bn in 2016-17.

The NAO says clinical commissioning groups and trusts are increasingly reliant on one-off measures to deliver savings, rather than recurrent savings that are realised each year. Between 2014-15 and 2016-17 the percentage of savings that were non-recurrent increased from 14% to 17% for commissioners, and from 14% to 22% for trusts.  It says this poses a significant risk to the financial sustainability of the NHS in the future.

Progress has been made in setting up 44 new partnership arrangements across health and local government, which are laying the foundations for a more strategic approach to meeting the demand for health services within the resources available. In reality, partnerships’ effectiveness varies and their tight financial positions make it difficult for them to shift focus from short-term day-to-day pressures to delivering transformation of services.

The NAO has made a number of recommendations to the DoH, NHS England and NHS Improvement, which includes moving further and faster towards aligning nationwide incentives, regulation and processes, as well as reassessing how best to allocate the sustainability and transformation funding.

Amyas Morse, NAO head, said: ‘The NHS has received extra funding, but this has mostly been used to cope with current pressures and has not provided the stable platform intended from which to transform services.

‘Repeated short-term funding-boosts could turn into the new normal, when the public purse may be better served by a long-term funding settlement that provides a stable platform for sustained improvements.’

Sustainability and transformation in the NHS is here.

Report by Pat Sweet